- The Washington Times - Sunday, November 14, 2004

President Bush, with a clear mandate from the voters, plans to tackle the two riskiest issues in American politics: reforming Social Security and overhauling the federal tax code.

Fixing just one of these programs would be a successful second-term agenda item. Simultaneously operating on both of them would be a Herculean undertaking. But Mr. Bush said at his postelection news conference that he came here “to get things done,” and he intends to cure what ails each of these federal behemoths before his term ends.

Saying these two systems need an overhaul is a massive understatement.

Economic observers fear the antiquated New Deal era retirement program faces bankruptcy if it is not restructured. And, as most Americans know, our tax system is an insane, Rube Goldberg contraption of special-interest loopholes, corporate welfare and stacks of paperwork that imposes tens of billions of dollars in compliance costs on all of us and severe disincentives to save, invest and grow our economy.

No doubt we will read and hear endless reports and punditry, giving us all sorts of reasons why Mr. Bush can’t do both. Here are some reasons why I think each goal is eminently achievable:

First, Mr. Bush has done a lot of preparation on Social Security reform. He talked about it in his first campaign in 2000. In his first year in office, he had a bipartisan commission propose several ways to change it. He made it a major plank in his re-election campaign.

His free market, wealth-creating prescription is a relatively simple one that has been studied and debated for a long time. Let younger workers, who choose to do so, invest a small portion of their payroll taxes in stock and bond funds over their working lives — just as members of Congress and many federal workers are allowed to do in their federal retirement plan.

This would accomplish two things: It would give workers a much better 5-7 percent investment return on their contributions than the paltry 1-2 percent most of us will get from the existing system. They will also own and control their accounts. No one can take the money and spend it on other things, as the feds do now with Social Security taxes.

Second, as these personal investment plans grow, they will provide an increasingly larger share of each retiree’s account, gradually relieving the Social Security system of the massive tax burdens future workers will bear if there are no changes.

Allowable contributions to the new accounts would be small in the beginning. But as participants see the income returns they will get as their portfolio grows over their working life, political demands will mount to raise the investment limits.

There is much more popular support for this idea than the national news media have been willing to report. Pollster John Zogby’s surveys show its appeal cuts across all political, income and racial lines. Unsurprisingly, support is greatest among younger workers.

Congress could draw up a preliminary pilot program within six months. How soon all this will happen depends on how much effort Mr. Bush puts into it. But with millions of Baby Boomers preparing to show up at the payment window in the next decade, time is of the essence.

Reforming the tax code has its own unique set of problems, though it shouldn’t be as hard as fixing Social Security.

For one thing, we’ve had a lot of experience changing the tax system. We seem to have a new tax bill every year. The last big reform plan was in 1986 when Ronald Reagan signed a revenue-neutral bill that lowered income tax rates and broadened the tax base by cutting out a lot of credits and deductions.

President Bush will name a bipartisan, blue-ribbon panel later this year, with clear instructions to overhaul and simplify the tax code, eliminate loopholes and make the system more pro-growth and pro-investment. Notably, no Bush economic adviser wants a pure, single flat tax or a national sales tax to replace the income tax, so those ideas are going nowhere.

In one respect, Mr. Bush wants to follow the Reagan rate-reduction model without reducing overall revenues. But he also wants to take tax reform further and make taxpayer compliance easier and cheaper.

Of course, Mr. Reagan had some bipartisan political help in 1986 that Mr. Bush may not receive this time — a gang of pro-growth Democrats led by then-Sen. Bill Bradley and Rep. Dick Gephardt, who sought to broaden the base and cut the rates. A deal former Senate Finance Committee Chairman Bob Packwood cut with Mr. Bradley provided the reforms Mr. Reagan wanted.

But Mr. Bush has one thing going for him Mr. Reagan did not: a Congress entirely run by Republicans (with strengthened majorities in both houses). A bill to make the tax code simpler and fairer, and lower tax rates, would have a lot of bipartisan appeal, especially among Senate Democrats who do not want to end up on Mr. Bush’s hit list in the 2006 midterm elections.

The betting in this corner is Mr. Bush will sign a tax reform bill before the end of next year.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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