The American Spectator

Special Report

The Strategy of the Smart Surrender

By Peter Ferrara on 5.21.08 @ 12:08AM

(Page 2 of 2)

It's not just the AMT where Frum wants to cave. He wants to take the same "smart surrender" strategy on the Bush tax cuts as well. He wants to extend his carbon tax to make up for the revenues lost by making the Bush tax cuts permanent.

But, of course, this would not make the Bush tax cuts permanent. It would effectively eliminate any net tax cut, and restore taxes to the levels before the Bush tax cuts.

Frum goes on to tell us that America's tax cutting days are behind her. He writes, "We will not soon again be able to offer America a big, broad, middle class tax cut."

That is because of America's looming entitlements crisis. Federal spending as a percent of GDP has been fairly stable for over 50 years now, since the early 1950s, at around 20 percent. But without fundamental reforms, that will soon change.

Primarily due to the big three entitlement programs, Social Security, Medicare, and Medicaid, Federal spending will soar over the next 35 years, to close to 40 percent of GDP. Frum writes, "In the face of such a huge fiscal gap, the days of broad, across the board, middle class tax cutting are over."

Indeed, Frum believes a tax increase will be inevitable to address this enormous long-term problem as well. Conservatives need to get in the game and lead the country to the least bad alternative tax increase. Thus we have Generation Y of the tax collectors for the welfare state, a true Son of a Dole.

FRUM MAKES TWO fundamental errors in this analysis. First, he fails to appreciate the overarching issue of economic growth in American politics. In other words, he is still behind the Carville curve ("It's the economy, stupid").

When Jack Kemp and Robert Bartley, the late director of the Wall Street Journal editorial page, convinced Ronald Reagan to run with the economic growth and prosperity through tax cuts theme was when Republicans were transformed from public support in the low 40s into a governing majority. Jack Kemp's central role in the political revolution we have experienced in the last 30 years is not sufficiently appreciated by conservatives today.

So even voters who pay little or nothing in Federal income taxes are primarily motivated by economic growth and personal prosperity. A message of tax cuts promoting economic growth will beat a message of tax increases promoting government spending every time.

McCain's tax policy of restoring the international competitiveness of America's corporations and employers will devour Barack Obams's promotion of the exact same tax policies and protectionism that produced the Great Depression. These messages, of course, must be well articulated to succeed.

Because of the economic growth message, and messages of simplicity and fairness, extensive polling shows that voters strongly support the idea of an option to choose a 17 percent flat tax. They also support capital gains and dividends tax cuts, and abolition of the death tax, for the same reasons. A Congressional supermajority requirement for tax increases is also popular.

Frum's second fundamental error is that Federal income taxes are not the only taxes voters pay. Replacing part of the payroll tax with personal accounts for Social Security polls extremely well. The long run vision should be to replace the entire payroll tax with personal accounts financing all of the benefits the tax does now. That is exciting and inspiring.

The housing crisis is causing local revolts against property taxes across the country. Nine states have no state income tax at all, including the large states of Florida and Texas. The other 41 states can phase out their state income taxes as well, replacing them with a combination of slightly increased sales taxes and restraints on state spending. This would tap into the grassroots popularity of a national sales tax.

This is quite a robust taxpayer agenda. This is no time for strategic surrender.

Letter to the Editor

topics:
Taxes, Barack Obama, Hillary Clinton, Entitlements, Social Security, Medicaid, Conservatism, Medicare