ONLY IN THE context of the glacial political minuet over Social Security could President Bush's comments last week that he might, perhaps, be open to the notion of raising the Social Security earnings cap be considered bold. Mr. Bush cracked that door open the tiniest bit, repeating his previous insistence that the 12.4 percent payroll tax could not be budged, but noting that "all the other issues are on the table." Asked specifically whether he would consider increasing the amount of earnings subject to the tax, Mr. Bush added, "I've been asked this question a lot, and the answer is, I'm interested in good ideas."
The reaction from certain quarters of the Republican Party to this welcome sign of presidential flexibility was as predictable as it was depressing. "We're not going to do that," House Majority Leader Tom DeLay (R-Tex.) said. "That's a tax increase." Speaker J. Dennis Hastert (R-Ill.) was only slightly less dismissive. Conservative interest groups, meanwhile, treated Mr. Bush's comments as heresy on a par with his father's move to break his "no new taxes" pledge. "President Bush needs to close that door to higher taxes, or risk losing the centerpiece of his domestic policy agenda," said former Republican congressman Pat Toomey, who is now president of the Club for Growth.
We've previously lamented the Democrats' head-in-the-sand approach to Social Security, which boils down to trying to scare people about how much Republicans want to cut their benefits without offering any responsible alternative for putting the system on a sounder financial footing. This may be smart politics, but it's bad public policy. But so, too, is its mirror opposite, the knee-jerk unwillingness on the part of a majority of the GOP to consider anything that might have any whiff of a tax increase.
In fact, raising the ceiling on income subject to Social Security taxes would be a sensible part of a balanced reform program. Broadening the base of the regressive payroll tax would be a fair and sensible way to address the shortfall. Indeed, in 1983, when the system was last revamped, 90 percent of wages were subject to Social Security taxes, but, because of growing income inequality, the current cap reaches only 85 percent of wages. Removing the ceiling entirely isn't warranted; it could push taxes too high, hurt the self-employed and encourage those at the upper end of the spectrum to manipulate their earnings to shift away from wages.
But raising the amount of wages subject to taxation, combined with sensitively crafted benefit cuts that affect those most capable of sustaining them, would be a smart component of an intelligent Social Security overhaul. Let's hope the president's expressed openness to this idea isn't stifled by the shortsightedness of too many in his own party.