"I mean, what the hell was that?" was the puzzled reaction of one conservative activist to a recent interview with soon-to-be White House contender Fred Thompson, in which the Republican compared tax cuts to entitlement spending. Two others expressed similar puzzlement in recent chats with me. According to the Washington Post:
"Nobody in Congress or on either side in the presidential race wants to deal with it," Thompson said. "So we just rock along and try to maintain the status quo. Republicans say keep the tax cuts; Democrats say keep the entitlements. And we become a less unified country in the process, with a tax code that has become an unholy mess, and all we do is tinker around the edges."
The problem, in the view of some economic conservatives, is that Thompson seemed to be equating tax cuts with entitlements as problems that need to be dealt with. That's kind of a shock for many GOP-ers looking for the former U.S. senator and actor to be Reagan 2.0. In fact, Thompson seemed to be advocating the sort of "root canal" economics that budget hawks like the Concord Coalition are always proposing: higher taxes and lower spending. Now Thompson has also publicly praised the wonder-working power of tax cuts. As he wrote in the Wall Street Journal last spring concerning the Bush tax reductions:
"Because of lower rates, money is being invested in our economy instead of being sheltered from the taxman. Greater investment has created overall economic strength. Job growth is robust, overcoming trouble in the housing sector; and the personal incomes of Americans at every income level are higher than they've ever been."
When Thompson finally throws his hat into the ring, he'll probably be more precise in just what his tax and entitlement policy views are. Rudy Giuliani, for instance, has made praise of tax cuts and supply-side economics a standard part of his stump speech. But on the issue of entitlements, consider this: Higher taxes could slow economic growth, which would make the Social Security part of the entitlements problem worse. As I wrote in this post earlier this year:
"While speedier economic growth alone might not make Social Security solvent for the long term, it does make other solutions less draconian. Combined with fixes such as (1) indexing initial benefits for middle- and upper-class workers to inflation rather than to wages (wage indexing only started in the late 1970s) and (2) slowly raising the retirement age, faster growth helps prevent huge tax hikes—which would hurt growth—and massive across-the-board benefit cuts. And don't forget that slower economic growth makes the problem worse. Huge benefit cuts would start around 2030 rather than 2042. That's one reason apparent slowing productivity growth in 2006 would be disastrous if it turns into a long-term trend."