Heritage Responds to Ferrara

Peter Ferrara does his best to paint as frightening a picture as possible of Congressman Frank Wolf’s proposal for an entitlements commission [“Wolf Bill Opens Door to Massive Tax Increase,” by Peter Farrara, June 26, 2006]. Although Congressman Wolf [R.-Va.] supported all of President Bush’s tax cuts, Ferrara suggests that an entitlements commission is nothing more than a plot to obtain a massive tax increase to finance an explosion in entitlements.

To make the picture even scarier, he explains that Heritage Foundation analysts have actually been meeting with those ghastly people at Brookings and the Urban Institute to see if there could be a consensus on entitlements. Even Cato gets included in the secret cabal to hike taxes.

As usual, Peter’s rhetoric gets the better of his facts.

I plead guilty to talking to people in other organizations to see if we can achieve a consensus on entitlement control. I did the same thing some years ago to see if we could get a consensus on welfare reform. That helped achieve a transformation of the welfare system and a halving of the welfare rolls. I’ve found that talking to non-conservatives is the first step to persuading them. And constructive conversation is good for one’s general disposition and temperament. Peter should try it.

Peter is certainly right that even if the Bush tax changes are made permanent, we’ll see a steadily rising proportion of GDP going in federal taxes in the future. So we’ve got to look not at raising that percentage further, but at achieving the tax reforms we all support that will spur economic growth. That, in turn, will generate more revenue as a byproduct of higher incomes and employment. If these growth-induced revenues help build broader support for pro-growth tax reform, and make it harder for non-conservatives to resist entitlement reform that reduces future spending, we advance the conservative agenda.

It’s worth noting that the Ryan-Sununu Social Security reform bill that Ferrara sees as an alternative approach is actually quite consistent with this strategy. That legislation projects faster economic growth—and hence revenue—as the byproduct of a reform based on personal accounts and then earmarks part of the extra revenue to help pay Social Security benefits during the transition. New revenue from reform helps clinch the political deal for the Social Security reform itself. The same approach may be the key to entitlement control.

There are risks associated with doing anything in politics involving taxes and spending. But, that said, this is the time to step up to the plate and propose creative and persuasive ways of changing the dynamics of the debate—not to distort and trash the motives of those who do.

—Stuart Butler
Vice President, Domestic and Economic Policy for The Heritage Foundation
Washington, D.C.