The liberal Reagan was...

by the standards of today's GOP, Ronald.

It's often pointed out that in the wake of his signature tax cuts, Reagan raised taxes six or seven times, notably in the social security bargain that raised payroll taxes on everybody. I've been looking at Reagan's State of the Union address of 1983, which led off with a victory lap in celebration of that grand bipartisan bargain:

Just 10 days ago, after months of debate and deadlock, the bipartisan Commission on Social Security accomplished the seemingly impossible. Social security, as some of us had warned for so long, faced disaster...

When the Speaker of the House, the Senate majority leader, and I performed the bipartisan-- or formed the bipartisan Commission on Social Security, pundits and experts predicted that party divisions and conflicting interests would prevent the Commission from agreeing on a plan to save social security. Well, sometimes, even here in Washington, the cynics are wrong. Through compromise and cooperation, the members of the Commission overcame their differences and achieved a fair, workable plan. They proved that, when it comes to the national welfare, Americans can still pull together for the common good.
Tonight, I'm especially pleased to join with the Speaker and the Senate majority leader in urging the Congress to enact this plan by Easter.

There are elements in it, of course, that none of us prefers, but taken together it performs a package that all of us can support. It asks for some sacrifice by all-- the self-employed, beneficiaries, workers, government employees, and the better-off among the retired-- but it imposes an undue burden on none. And, in supporting it, we keep an important pledge to the American people: The integrity of the social security system will be preserved, and no one's payments will be reduced.

The Commission's plan will do the job; indeed, it must do the job. We owe it to today's older Americans and today's younger workers. So, before we go any further, I ask you to join with me in saluting the members of the Commission who are here tonight and Senate Majority Leader Howard Baker and Speaker Tip O'Neill for a job well done. I hope and pray the bipartisan spirit that guided you in this endeavor will inspire all of us as we face the challenges of the year ahead.

That major tax hike and deal with the Dem devil was not Reagan's only departure in the 1983 SOTU from current GOP orthodoxy. He did, it's true, propose to hold Federal spending growth to the inflation rate,  freeze pay for Federal workers, find some defense "savings" in the wake of his previous buildup, and slow the growth of  so-called "automatic spending programs," for which his poster item was that easy path to ill-gotten riches, food stamps. But then, apparently not yet aware that he had proven that "deficits don't matter," he worked the other side of the equation:

And fourth, because we must ensure reduction and eventual elimination of deficits over the next several years, I will propose a standby tax, limited to no more than 1 percent of the gross national product, to start in fiscal 1986. It would last no more than 3 years, and it would start only if the Congress has first approved our spending freeze and budget control program. And there are several other conditions also that must be met, all of them in order for this program to be triggered.

Now, you could say that this is an insurance policy for the future, a remedy that will be at hand if needed but only resorted to if absolutely necessary.

Standby tax?  When did you ever read about that one?  It seems to have dropped out of the national consciousness as soon as uttered.  But the patron saint of supply-side economics uttered it.

Further, fond though he was of demonizing "welfare queens" and alleged food stamp cheats, with unemployment topping 10% Reagan had not quite reached the unemployed-are-like-stray-animals level of social Darwinism attained by his acolytes of today:

Social Security benefits are skewed to low earners

There's been much bloggiating lately on means-testing social security, raising the retirement age, or listing the cap on earnings subject to the social security tax (FICA), currently set at $106,800. The FICA tax is 6.2% each for employer and employed -- or 12.4% for the substantial percentage of high earners who are self employed.

While raising the retirement age disproportionately affects lower earners, who have lower life expectancies,  lifting the FICA cap combined with making benefits contingent on need would mean truly socking it to the wealthy and affluent.  Proponents -- including, oddly, traditionally zealous enemies of "confiscatory" taxes on wealth -- seem to suggest that high earners are getting some kind of free ride from social security. Here's John Boehner, for example, in favor of means-testing:

If you have substantial non-Social Security income while you're retired, why are we paying you at a time when we're broke?

What seems lost in this conversation is the fact that at present social security benefits are allocated disproportionately to low earners. It's true that the tax is not progressive -- those earning $100k pay the same percentage as those earning $20k, while and those earning, say, $213,600 (twice the cap) pay half the rate on their total income.   But the benefits reaped constitute strongly diminishing returns as one's income increases.  Benefits are based on a taxpayer's  average indexed monthly earnings (AIME) up to the taxable cap. Of those earnings, averaged over 35 years, those who retire at age 66 currently get the following in SS benefits:

• 90% of the first $761 of AIME
• 32% of the AIME between $761 and $4,586
• 15% for the AIME above $4,586 (up to $8900, beyond which there's no tax or benefits).

Three-point shot: Obama hits McCain on healthcare, social security, Wall Street

Obama sank a three-point shot against McCain's claim to be an effective economic reformer today. Speaking first at Bethune-Cookman University and then at an outdoor rally in Jacksonville, he simultaneously hit McCain on three closely linked fronts - wanting to privatize social security, being a longtime advocate of bank deregulation, and proposing further deregulation of our chaotic health insurance system. He exposed as completely bogus McCain's newfound zeal for tough regulation.

Here's ABC's account of the healthcare-banking connection:

At the end of a week of Wall Street bailouts and government negotiations to take over hundreds of billions in bad loans, Obama contends McCain is a newcomer to government regulation of Wall Street.

Speaking before a crowd of 2,500 at an event focused on women’s issues – Obama called McCain out for once suggesting deregulation of the health care industry like the banking industry.

Obama used McCain’s words – and the financial crisis against him – reading a quote from McCain which was published in "Contingencies" magazine last year.

"Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation, McCain said in the magazine in their September/.October 2007 issue.

Today, Obama read back the quote to the crowd and in astonishment said, “So let me get this straight – he wants to run health care like they’ve been running Wall Street. Well, Senator, I know some folks on Main Street who aren’t going to think that’s such a good idea.”

And here is Reuters on the banking-social security connection:

[Obama] attacked McCain for supporting some privatization of Social Security retirement funds, a proposal President George W. Bush made a centerpiece of his 2004 White House campaign but was unable to push through Congress.

"I know Senator McCain is talking about a 'casino culture' on Wall Street -- but the fact is, he's the one who wants to gamble with your life savings," Obama said at a rally in Daytona Beach in Florida, a state with a large population of seniors and retired workers.

"That is not going to happen when I'm president," the Illinois senator said, asking the crowd to imagine the fears of retirees who found their Social Security funds tied to the current market.

The common thread, of course, was deregulatory zeal:

"There's only one candidate who's called himself 'fundamentally a deregulator' when deregulation is part of the problem," Obama said.

These thrusts are going to sink deep into McCain's reformer posture. Democrats have long run on claims that Republicans want to destroy Medicare and Social Security, and sometimes those claims have had a demagogic edge. But Obama's claim that McCain wants to do to healthcare and social security what Phil Gramm (a.k.a. Dereg) and his wrecking crew did to banking has the advantage of being true. McCain was zealous for bank deregulation; McCain himself has drawn the analogy between bank deregulation and unfettering insurers from state healthcare mandates; McCain's ridiculous healthcare plan would indeed free insurers to riddle health insurance with ever more coverage restrictions and exclusions. As for Social Security, McCain has been pushing privatization since the late '90's; he supported Bush's privatization proposal; and as recently as March he disavowed the plan on his own website to establish private accounts separately from the existing system, insisting that the privatization should be built into a portion of each person's current social security set-aside.

At the darkest hour of McCain's post-Convention bump, I confess to worrying that McCain might win -- as I still do. But I never lost my faith that Obama and his chief campaign architects understood better than all his critics -- better than anyone -- how to conduct an effective campaign. That faith is redoubled now. Obama has brilliantly, patiently, meticulously positioned himself for full frontal attack -- now, when the nation's attention is riveted. He has seized and held the high moral ground, nurturing the meme that the McCain campaign has set new standards for viciousness and dishonesty and letting it take hold before concentrating his fiercest fire.

Now, as he binds McCain ever-tighter to discredited policies (more tax cuts for the wealthy) and bankrupt ideas ("I'm always for more deregulation"), he maintains the moral contrast by continuing to make clear that he is faulting McCain on policy and outlook rather than on character. At the convention, Obama's keynote was, "it's not because John McCain doesn't care, it's because John McCain doesn't get it." This fleshed out his months-old claim that McCain would continue the failed policies of the last eight years. It also contrasted pointedly with McCain's scurrilous character attacks on Obama. The party heavies followed his lead, collectively killing McCain with kindness.

As the market tsunami broke last week, Obama continued the two-step, making the gesture of fairness before launching a pinpoint strike on McCain's approach to economics:

I certainly don’t fault Senator McCain for these problems, but I do fault the economic philosophy he subscribes to. It’s a philosophy we’ve had for the last eight years – one that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else. It’s a philosophy that says even common-sense regulations are unnecessary and unwise, and one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises. Well now, instead of prosperity trickling down, the pain has trickled up – from the struggles of hardworking Americans on Main Street to the largest firms of Wall Street.

Again, the attack has the supreme virtue of being true -- and giving the lie to McCain's vociferous promises to reform Wall Street. These calm, precise charges contrast beautifully with McCain's ridiculous charges that Obama was closely tied to former Fannie Mae CEOs Johnson and Raines and somehow personally responsible for the market meltdown.

McCain's chickens are coming home to roost. The more he flails at Obama with charges of being vapid, all talk, unpatriotic, and motivated solely by ambition, the more gravitas he lends to Obama's attacks on McCain's governing philosophy and support of Bush policies. The debate that Obama has always said he's eager to have -- over policy -- will play out on his terms.

Related posts:
Killing McCain with Kindness
Obama does it with integrity

McCain's economic bridge to nowhere

The Wall Street Journal's Bob Davis, reporting on an interview with John McCain focused on his economic platform, does a nice job highlighting multiple inconsistencies -- not to say an overall incoherence -- without any explicit diss. Repeatedly, Davis presents McCain's claims against an understated backdrop of inconvenient truths.

Among the highlighted lacunae:

Social security reform: "the Arizona senator says he still backs a system of private retirement accounts that President Bush pushed unsuccessfully, and disowned details of a Social Security proposal on his campaign Web site." That is, the website calls for a plan similar to Hillary Clinton's, creating personal investment "supplementing" social security, without touching the structure of the existing program. That's a switch from his 2000 campaign, when McCain called for diverting a portion of social security taxes to fund private accounts, as Bush tried to do in 2005. McCain's chief economic aide, Douglas Holtz-Eakin, chalks up the change to the runup of the deficit in the Bush years.

But, Davis reports, "asked about the apparent change in position in the interview, Sen. McCain said he hadn't made one. 'I'm totally in favor of personal savings accounts," he says. When reminded that his Web site says something different, he says he will change the Web site. (As of Sunday night, he hadn't.) ' As part of Social Security reform, I believe that private savings accounts are a part of it -- along the lines that President Bush proposed."

This repudiation highlights the article's subtext: that McCain claims to be a deficit hawk but avoids any serious attempt to make his numbers add up - that is, to deal with the deficit. Which brings us to self-repudiation #2:

Bush tax cuts and more: As is well known, McCain voted against Bush's massive tax cuts in 2001 and 2003 but now opposes letting them expire. Now he wants to pile on with a cut in the corporate tax rate from 35% to 25% at a cost of $100 billion per year, and elimination of the Alternative Minimum Tax, at a cost unspecified in the Journal article but estimated by the Urban Institute-Brookings Institution Tax Policy Center at least $800 billion over the next decade (Aviva Aron Dine, Center on Budget and Policy Priorities). "In all," Davis reports, "his tax-cutting proposals could cost about $400 billion a year, according to estimates of the impact of different tax cuts by CBO and the McCain campaign. The cost will make it difficult for him to achieve his goal of balancing the budget by the end of his first term."

Offsetting savings? Davis makes it clear that they're pitifully inadequate:

To show he can control spending, Sen. McCain cites his long record as a spending hawk, who battles sweetheart deals between the Pentagon and defense contractors, as well as projects that lawmakers of both parties cram into appropriations bills -- "earmarks," in budget lingo.

Congressional earmarks total $18 billion a year, according to the Taxpayers for Common Sense, a Washington, D.C., research group -- and each has a member of Congress who will ferociously fight to keep that spending going. Mr. Holtz-Eakin, the McCain adviser, says that earmarks actually cost $60 billion a year, counting programs that started in earlier years and get funded year after year.

Another source of spending cuts eyed by the McCain campaign is a White House hit list of underperforming or redundant programs. But again, the numbers are relatively small -- $18 billion annually -- compared to the cost of Sen. McCain's tax plans, and the programs include housing loans, education grants, and water projects popular with Congress.

The accompanying interview highlights the absurdity. Asked by Davis, "are you worried your numbers don't add up?", McCain responds:

If you just look at two spending bills that the president signed into law, there's $35 billion just in those two bills [that could be cut]. I saved the taxpayers over $6 billion on one Air Force tanker deal. I'm not worried about being able to find savings in government.

I love the use of brackets above - $35 billion [that could be cut] -- if the President got every cut he claimed to want in two bills totaling several hundred billions in spending. That's in a budget with a current deficit of over $400 billion. Tack McCain's $400 billion in new tax cuts onto that, and then take a guess at the cost of maintaining over 100,000 troops in Iraq indefinitely.

Slow Stimulus: To get the economy going, Davis emphasizes that McCain "said he might have 'a couple of fireside chats with the American people.'" Beyond that, nothing -- except extending the Bush tax cuts and adding his own:

While other candidates were scrambling in January to put together stimulus plans to boost flagging consumer spending, he proposed long-term tax cuts which could take years to come into law. "In the shorter term, if you somehow told American businesses and families, 'Look, you're not going to experience a tax increase in 2010,' I think that's a pretty good short-term measure," he says.

The Bush tax cuts have already been justified, first by the surplus of 2000, then by the recession of 2001, then by the recovery of 2003-07. Now McCain is tacking on the anticipated recession of 2008. Here we go again: massive tax cuts are the cure for every economic slowdown, and the cause of all economic growth.

Pat Buchanan recently said that McCain running our foreign policy "could make Cheney look like Gandhi." With this deadpan presentation, Bob Davis makes it clear that McCain running the economy could make Bush look like Alexander Hamilton.

Related posts:
Obama and Clinton share a pander on trade
Obama channels Edwards in Janesville