Tuesday, December 19, 2006

The Bush administration has sent signals since last month’s elections that the president is prepared to accept some tax increases on upper-income families, worrying congressional Republicans and fiscal conservative watchdogs who say he will compromise with Democrats to win a legacy accomplishment.

These moves come even as Democrats have pledged to rein in earmarks, winning praise from the same conservative groups that are criticizing Mr. Bush.

The watchdog groups have been demanding that the president repeat his earlier pledges not to raise taxes in order to reform Social Security. But the White House has refused, with officials saying everything is on the table, including tax increases.

“So far, no one in the administration has simply stood up and said, ‘We will not raise payroll taxes in any way, shape or form,’ ” said Pete Sepp, a vice president for the National Taxpayers Union, which led a coalition of several dozen groups to write a letter asking for such an assurance.

Meanwhile, the House’s top Republican on tax cuts, outgoing Ways and Means Committee Chairman Bill Thomas, warned last week that the White House has hinted that it will accept a tax increase on higher-income families in order to win accommodations from Democrats.

“I wish I were a bit more comfortable in listening to some of the noises that are currently being made,” Mr. Thomas, California Republican, told the American Enterprise Institute, saying he is seeing signs that the administration may be “moving away from hard-fought policies to salvage what you thought you weren’t going to get.”

“Based upon some statements made by people in prominent positions who deal with money within the administration, comments about the individual top tax rate make me a little nervous,” he said.

The White House-congressional split highlights a problem that Mr. Bush is likely to face for the next two years: the increasing division between Mr. Bush and his party as he works to find common ground with Democrats and Republicans work to hold the line on tax cuts and other gains they made on the Republican agenda.

Social Security could be the first test. Since November, Mr. Bush has said everything should be on the table in the effort to fix the program’s finances — a statement in sharp contrast to his declaration after the 2004 elections that “We will not raise payroll taxes to solve this problem.”

Asked twice in recent weeks about the president’s plans, White House press secretary Tony Snow wouldn’t rule tax increases out.

“I’m not ruling it up and I’m not ruling it down, because you know what, as you and I have seen in the past, definitions of these things can be very squirrelly,” Mr. Snow told reporters at one briefing.

“There is White House staff up on the Hill pushing this,” said Phil Kerpen, director of policy for Americans for Prosperity, one of the watchdogs. “There has been for months. They really feel this is a legacy issue, and they’re willing to accept compromise on policy issues.”

It’s not just Mr. Bush who is looking for a deal on Social Security.

Sen. Mitch McConnell, the Kentucky Republican who will become the party’s Senate leader next year, also says all options are on the table as he tries to force the issue onto the agenda.

“We all know this is an enormous problem,” he told a farm group recently, according to the Associated Press. “We all know that it will get worse each year if not tackled. Sometimes, divided government produces very good results on big issues.”

As some Republicans say they are open to tax increases, Democrats have said they will do what Republicans could not do when they controlled the Capitol — crack down on earmarks, the pork-barrel spending that many lawmakers say symbolizes Washington’s deficit-spending problem.

The top Democrats on the House and Senate appropriations committees have promised to keep earmarks out of this year’s spending bills until they come up with a reform package that makes the process more transparent.

This weekend, incoming Senate Majority Leader Harry Reid, Nevada Democrat, said it will be among their top priorities.

That comes as Democrats have been making headway among voters on spending, according to a Club for Growth poll taken in competitive districts during last month’s elections that showed Republicans have “squandered the brand on this,” said Patrick J. Toomey, the club’s president and a former Republican congressman from Pennsylvania.

Mr. Toomey, though, said he doubts Democrats follow through on their pledge.

“Let’s remember, this is the party that openly advocates for expanding the size of government and the power of Congress,” he said. “I don’t see any indication yet of a serious and substantive change in the earmark process. I hope I’m wrong.”

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