August 25, 2004, 8:55 a.m.
Time for Tax Reform?
The prospects for Bush’s second-term agenda.

As the Republican National Convention approaches, pressure is building on President Bush to lay out a second-term agenda. With John Kerry running no worse than even in most polls, many Republicans believe that Bush needs a big idea to galvanize his supporters. I think they are probably going to be disappointed.

The fact is that very few presidents ever have a meaningful second-term agenda. First of all, they don’t need one to get reelected because they cannot run for a third term. Second, they don’t have the time or the political clout to get anything big through Congress because they are lame ducks.

The sole exception to this rule that I can think of is the Tax Reform Act of 1986, which Ronald Reagan pushed through in his second term. But as they say, it’s an exception that proves the rule.

Reagan had a clear tax philosophy — he wanted tax rates to be as low as possible. After cutting rates in 1981, however, the emergence of budget deficits made further tax cuts impossible and, in fact, led to tax increases. But Reagan was always adamant that tax rates not be increased in any of the many tax increases he signed into law. Had the first President Bush understood this point, he likely would have been reelected in 1992.

Consequently, under Reagan the effort to continue rate reduction necessarily shifted toward tax reform, which in essence involves raising taxes to pay for further rate reductions. As early as 1982, there was considerable discussion of this idea in Congress, with two key alternatives emerging — the Kemp-Kasten bill, authored by Rep. Jack Kemp (R., N.Y.) and Sen. Bob Kasten (R., Wis.), and the Bradley-Gephardt bill, sponsored by Sen. Bill Bradley (D., N.J.) and Rep. Dick Gephardt (D., Mo.). Although considerably different in their details, both bills had the same goal — to close tax loopholes and use the revenue to reduce rates.

By January 1984, when Reagan announced a Treasury Department study of tax reform, the debate was already well advanced. The following year, the White House sent a proposal to Capitol Hill embodying recommendations from the Treasury study, as well as elements of the congressional bills. In essence, it represented a consensus view of tax reform, which is why it was able to get through Congress in 1986.

The point is that tax reform wasn’t something that Reagan suddenly announced at the 1984 convention as the key element of his second-term agenda. It was already well in the works; detailed plans had been under consideration in Congress for some time. All Reagan had to do was push the ball over the goal line for the final score.

Had Reagan waited until his second term to begin the tax-reform process, I seriously doubt that he would have been successful. There simply isn’t time to start from scratch with such a big initiative, given the slowness of Congress and all the competing matters requiring the president’s time.

With this history in mind, how likely is it that Bush will come up with something big at the convention that will have even the remotest chance of legislative success? Not very. He would need to have prepared the ground a lot better for something like tax reform or Social Security reform to really be viable anchors for a second-term agenda.

Although Bush often talks about Social Security reform, he has never outlined a specific proposal. He appointed a commission to do so and then promptly forgot about it. His comments on the subject since then have been so vague as to be virtually meaningless. And given the deficit and huge cost of the Medicare drug benefit that he rammed through Congress, it’s hard to see where the money would come from to finance the transition to a privatized Social Security system.

Tax reform will be even harder because it would require the undoing of much of Bush’s tax policy of the last three years. Given that he is publicly committed to making every element of his tax legislation permanent and that he is facing a big problem with the alternative minimum tax, it’s hard to see how a meaningful tax-reform initiative would even begin.

Finally, there’s the Iraq situation. This will likely eat up a huge portion of the president’s time and attention, leaving very little for anything on the domestic side. We also know from history that presidents tend to concentrate more on foreign policy in their second terms.

Realistically, there is unlikely to be a second-term agenda for Bush, regardless of what he may announce at the convention. There is simply nothing in the pipeline and it’s too late to start something new.

— Bruce Bartlett is senior fellow for the National Center for Policy Analysis. Write to him here.

*   *   *

YOU’RE NOT A SUBSCRIBER TO NATIONAL REVIEW? Sign up right now! It’s easy: Subscribe to National Review here, or to the digital version of the magazine here. You can even order a subscription as a gift: print or digital!