WASHINGTON — With the Republican National Convention approaching, the lack of details offered by President Bush for a second-term domestic policy agenda has left some conservative activists worrying aloud about The Vision Thing.
See more coverage of the Republican National Convention
But others make the case that while the individual pieces of Bush’s emerging agenda might not appear that weighty or new, they still add up to something big.
Bundled within the overlapping themes of tax reform and economic “ownership,” they say, are initiatives that, if enacted, would move the country toward fundamentally different systems of taxation and social insurance.
Wage income would be taxed at something close to a flat rate instead of today’s graduated rates. Investment income would be largely tax-free. And individuals would shoulder more of the risk for their financial security, in return for potentially greater rewards.
“If you tell liberals that we’re going to have a flat tax, that’s like putting a cross in front of a vampire: They start cringing,” said Stephen Moore, president of the Club for Growth, a conservative fund-raising organization. “By doing these things in little bitty steps at a time, it’s sort of like a slippery slope but in the right direction.”
“What they’re trying to do is a radical transformation of the tax code,” said Peter Orszag, a former economic adviser to President Clinton and now a senior fellow at the centrist Brookings Institution. “They’re trying to do it in little pieces rather than all at once. The sum of all those pieces would be a radical change.”
Analysts and advisers, including some who have been conferring with the administration, said the president’s short list of second-term priorities was likely to include:
* Making previous tax cuts permanent instead of allowing them to expire at various points over the next seven years. They include lower income-tax rates, expanded breaks for married couples and families, reduced taxes on dividends and capital gains, bigger corporate tax deductions and a phased-out inheritance tax. Cost: about $1 trillion over 10 years.
* Allowing workers to divert a portion of their Social Security payroll taxes to new individual retirement accounts over which they control the choice of investments. Like 401(k) plans, their future value would depend on market performance, not government guarantees. Cost: $1 trillion over 10 years to maintain currently promised benefits.
* Scaling back the alternative minimum tax, which prevents the wealthy from using loopholes to eliminate their tax liability but has begun to bite at the middle class because of income inflation. Cost: perhaps $500 billion over 10 years.
* Creating new vehicles, including lifetime savings accounts and retirement savings accounts, for reducing future taxes on savings and investment. Cost: minimal over the first 10 years, but increasingly large as future earnings are withdrawn.
* Expanding health savings accounts, which allow Americans to accumulate money tax-free for future medical expenses, and creating similar homeownership tax breaks, such as credits for first-time buyers. Cost: uncertain.
On the campaign trail, Bush for the most part has stuck to perennials from his “six-point plan” for economic growth, such as tort reform, energy legislation and more tax cuts.
But he has begun throwing in a few hints about his Ownership Society agenda.
“During the next four years, we’ll help more citizens to own their health plan, to own a piece of their retirement, to own their own home or their own small businesses,” Bush told supporters at a Washington fund-raiser last month. “We’ll usher in a new era of ownership in America, with an agenda to help all our citizens save and build and invest, so every person owns a part of the American dream.”
“We’ll be working to build a culture of ownership in America,” he told participants in a voter roundtable in Annandale, Va., earlier this month. “We want more people owning things in this country.”
The lack of specifics has rattled some conservatives. Like his father 12 years ago, they say, Bush must articulate a bold domestic agenda, or risk losing the election by seeming out of touch with voters’ pocketbook concerns.
“He needs to do something to assure core supporters that things aren’t out of control … and that the administration stands for something,” said John Samples, director of the Center for Representative Government at the libertarian Cato Institute.
Former Republican congressman and Housing Secretary Jack Kemp, a prominent tax reform advocate, said he was optimistic about what he’s hearing from Bush. “On the stump, he’s talking about this Ownership Society, about stakeholder democracy and the democratization of capitalism. I’ve been working with the platform drafters, and I have a good feeling they’re going to be articulating these ideas.”
Any fears about Bush’s vision will be laid to rest when he takes the podium in New York on Thursday, the final night of the Republican convention, his supporters say.
Greg Valliere, chief strategist for the nonpartisan Charles Schwab Washington Research Group, agrees that Bush will trumpet his tax and ownership themes when he speaks to convention delegates.
But he thinks the president will stop short of endorsing an aggressive tax reform initiative, which could entail eliminating popular tax breaks such as the mortgage interest deduction, or calling for a specific Social Security privatization scheme containing offsetting benefit cuts or payroll tax increases.
“Obviously, there are some activist conservatives who want to see him come up with a blockbuster, but I think his inner circle will be more cautious,” Valliere said. “You need to prepare people for this. You need trial balloons. Big ideas create fat targets. I think it’s unlikely there will be anything huge.”
Bruce Bartlett, senior fellow at the conservative National Center for Policy Analysis, believes foreign policy would dominate Bush’s second term and considers the Ownership Society agenda largely rhetorical.
“It sounds to me like something a focus group came up with,” Bartlett said. “There’s a desire for something meatier, but I just don’t think they have anything to give them. So they’re going to try to substitute rhetoric for substance, and hope that’s good enough to get them through the election.”
Even if Bush surprised the skeptics and pushed hard for aggressive second-term domestic initiatives, it remains uncertain whether Congress would have the stomach for such change in the face of widening federal deficits.
It also is unclear whether the public would be eager to assume more ownership of their financial futures in the aftermath of the stock market collapse, mutual fund scandals, diminished 401(k) account values and a struggling job market.
“For 90 percent of the population, ownership is nice, but a job is what matters,” said chief economist Bill Cheney at MFC Global Investment Management in Boston. “When the job market was tight back in ’98, ’99, people were happy to be diverted toward the issue of stock ownership. But right now, I don’t think that’s front and center for most people.”
Robert B. Reich, President Clinton’s labor secretary, said he viewed Bush’s ownership agenda as new packaging for a collection of old ideas widening the gap between rich and poor.