DICK MORRIS’ ’08 PLAY-BY-PLAY

Volume 1, #21

October 26, 2007

WHAT SHE’D DO: HILLARY’S HIDDEN AGENDA AND HOW MUCH MORE IT WILL COST YOU

When a major presidential candidate refuses to reveal the specifics of her campaign program, taking the position that she “won’t answer hypothetical questions,” how are we to gauge her candidacy and intentions?

There’s only one way: We must become detectives, reading her statements – particularly between the lines – to figure out her ideas and likely governing philosophy. And we also need to examine the agenda being formulated in Congress by the left wing of the Democratic Party to help us to fill in the blanks in assessing Hillary’s true intentions.

She’ll never tell us.

The headline to this article is intentionally conditional (“what she’d do”, not “what she’ll do”) because, despite her front runner status, she is, thankfully, not inevitable. But we can’t ignore her commanding lead in the Democratic Primary (Rasmussen has her at 46% with Obama at a puny 18% and Edwards out of sight at 11%) and her strong showing in general election matchups (she beats everybody but Giuliani).

So it is definitely appropriate to read the tea leaves and project what President Hillary would do if elected.

The answer is not pretty. If she is elected, as it looks like she will, there is a very good likelihood that she will bring with her a heavily Democratic Senate. With four Republican incumbents endangered (Coleman, Minn; Sununu, N.H.; Smith, Ore; and Collins, Me) and four open seats likely to go from Republican to Democrat (Virginia, N.M., Colorado, and, possibly Nebraska), she could have 58 Democrats at her beck and call, making a filibuster unlikely.

That highly Democratic Congress and President Hillary would likely combine to enact legislation so far reaching and ideologically polarizing as to be a rare turning point in American history. One has to think of Woodrow Wilson’s first two years, FDR’s first term, Lyndon Johnson’s first two years as president and, on the right, Reagan’s revolution to find anything comparable in scope and extent.

It’s a frightening thought.

Start with her tax policies.

TAXES

Hillary makes no secret of her intention to roll back Bush’s tax cuts on the ‘wealthy.’
But her definition of ‘rich’ is sufficiently inclusive so as to encompass everyone with a family or household income over $200,000 a year. Clearly she would include the following in the tax cuts she will repeal (or allow to sunset):

• She’d raise the top bracket of the federal income tax, restoring it to 39.6% from its current 35% level.
• She’d increase the capital gains tax, restoring it to 20% – or maybe even go higher. My bet is that she will increase it to 30% or even eliminate special treatment for capital gains altogether, taxing gains as ordinary income (at 40%).
• Hillary will almost certainly roll back much- if not all- of the estate tax reductions of recent years, lowering dramatically the size of estates subject to the levy.
• She’d restore the tax on dividends to 30% from its current 15%.

But her agenda will doubtless go further. She will be much more radical in raising taxes than Bush was in cutting them.

SOCIAL SECURITY TAXES

One of her most important steps will probably be to raise Social Security (FICA) taxes. She won’t raise the rate since that would impact her liberal base. Instead, she’ll raise the threshold of income that subject to taxation, now limited to the first $97, 500 of income.

At a recent candidate forum in Iowa, Hillary played it cute. First, she told the audience that she had nothing ‘on the table’ about Social Security taxes. Then, after the meeting, she privately told Todd Bowman, a schoolteacher who was in the audience, that she would consider imposing FICA taxes on all those who earn more than $200,000. She told Bowman that she would probably keep the current threshold at $100,000, skip the next hundred thousand of income, and then tax all income over $200,000 for Social Security.

So, look forward to some big changes there.

(Of course, she will not remove the cap on benefits, just on taxes).

Her remaining tax increases will likely relate to ending the capital gains treatment of carried interest in partnerships. Managers of real estate, energy, or private equity partnerships pay capital gains taxes on their management fees or their share of the profits even though their payments have nothing to do with any capital they may have directly invested.

Hillary will dress up these tax increases (the biggest in history) as tax relief for the middle class! She’ll maintain this fiction by using the bogyman of two largely theoretical tax increases which might eventually confront middle class taxpayers.

EXTENDING THE BUSH MIDDLE CLASS TAX CUTS

First, she’ll take credit for renewing the Bush tax cuts in the middle and lower income tax brackets. Projected over ten years, this will come to a tidy sum of “tax relief” she will offer to the middle class. Since these cuts are slated to expire in the early years of the next president’s first term, their extension could be billed as a middle class tax cut.

THE ALTERNATIVE MINIMUM TAX CUT

Second, she’ll change the nature and structure of the Alternative Minimum Tax (AMT) so it does not affect the middle class as drastically as it will if left unchanged. This legislation, enacted more than a decade ago, was designed to subject all high income taxpayers to a minimum proportion of their income they had to pay in taxes regardless of which deductions or shelters they claimed on the tax forms.

But inflation and increased prosperity has now moved 23 million Americans into a position where the AMT would apply to them.

Hillary never mentions that it was her husband who vetoed the repeal of the AMT in 1999. No, it’s all the Bush Administration’s fault.

In recent years, Bush and the Congresses have chosen to adopt one year patches to postpone the effective date of the expansion of the AMT to the middle class. They did so because they didn’t want to have to account for the ten year projected revenue loss repealing or modifying the AMT would entail.

But it’s a game. Nobody expects the AMT to take full effect, ever. However, the amounts involved are so stupendous that Hillary can take credit for all of it, over ten years, as part of her “middle class tax cut.”

By cutting the two theoretical tax increases – renewing Bush’s middle income cuts and reforming the AMT – she can show the biggest net tax reduction in history at the same time that she is, in fact, legislating the largest net increase in history.

HEALTH CARE

Having once been wounded and left for dead by her signature issue, she is very carefully deceiving us about what she would actually do as president in changing health care. She pretends that she would simply move to cover the 45-50 million uninsured and would leave everybody else’s health care insurance in tact.

But her pretensions are nonsense. If Hillary extends health coverage to 50 million Americans, she will drastically increase the demand for all manner of health and hospital care services. The fact that most of those who will be newly covered are illegal immigrants or other people living just below or just above the poverty level indicates an especially high rate of increase in demand for services. But the supply won’t go up. There will be no sudden increase in the number of doctors, nurses, or hospital beds.

With a constant supply and a rapidly increasing demand, prices for health care will skyrocket. But with 16% of our GDP currently going to health care, how much more can we afford? No other country has more than 11% of its economy devoted to the medical sector. The Administration will have to resort to price controls or limits on health care utilization to temper the increase in health costs.

That means one absolute change that she’s keeping quiet about: health care rationing by the government. Hillary will say that it is fairer to ration health care based on merit than on price as it is now done. But the fact remains that “no, you can’t” will be heard more and more by those seeking health care.

This impact will be especially great on the elderly, where life and death decisions must be made with a view to balancing costs with benefits. While every elderly person is already covered by Medicare, of course, the aggregate increase in demand caused by the inclusion of 50 million new people in the system will drive up costs for all and require rationing for all. And it is easiest to ration medical care to the elderly. Half of all Medicare spending is during the final year of the patient’s life. We will see a revisiting of the “duty to die” ideas of former Colorado Governor Dick Lamm.

The long term effects of Hillary’s health care reforms will fundamentally change the entire nature of our medical system. The utilization controls and cost limits will make the current private insurance system a cover and a front for increasing government regulation.

PRESCRIPTION DRUGS

In the area of prescription drug costs, which account for 10% of all health care spending, we can anticipate major efforts to reign in costs, requiring generic drugs on all Medicare and Medicaid prescriptions, cut backs on pharmaceutical advertising, and limits on drug company reps who push their medicines on doctors.

The taxes Hillary will raise can always be repealed. But her health care changes are forever.

EDUCATION

Hillary will likely follow the lead of Congressman George Miller, Chairman of the House Education Committee, in weakening the essential provisions of the
No Child Left Behind Act. Under its current provisions, schools and students are rated based on objective test scores. Miller’s proposals, which Hillary will probably adopt, call for using graduation rates as a substitute for testing in assessing student and school performance.

The difference is crucial. It means that subjective grading by the teachers themselves will be used to asses the success or failure of their teaching. A system designed to bring higher standards to schools will bend to accommodate mediocrity as a result of pressure from the teachers unions.

IMMIGRATION

Hillary is co-sponsor of two key bills: The SOLVE Act and the DREAM Act. These two acronyms describe legislation which would give every illegal immigrant, and their children, legal status if they have lived in the United States for five years.

To earn this amnesty, they will not be required to learn English, have a job, stay arrest-free, pay taxes, or jump through any of the hoops set up by the Bush Administration. They would simply have to live in the U.S. for five years without getting caught.

These laws also guarantee in-state tuition for all children of illegal immigrants who have lived here for five years.

And, since the illegal immigrants would now get legal status, they would be eligible for another of Hillary’s campaign promises – free health insurance for all citizens and legal immigrant children.

So, here’s the deal: Come here illegally. Dodge the cops for five years. Then you can get legal status, a path to citizenship, health insurance for your kids and in state tuition at their local state university.

SOCIAL POLICIES

One of the most novel of Hillary’s ideas (and perhaps the most pernicious) will be the extension of government largesse to the middle class.

Hillary realizes, as Bill once told me, that any government entitlement for poor people can be easily repealed since they lack political power and practical voting strength. But middle class entitlements, once granted, last forever – see Social Security and Medicare and rent control in New York City.

So Hillary will pioneer entitlements and grants for middle class families, making them at once dependent on government aid, winning their political gratitude, and giving them a stake in benefit programs that also help the poor.

She will bring us much closer to the Swedish, French, and German model where everybody gets
a check from the government, regardless of their wealth or income, making it impossible to criticize the program.

Already she has floated three ideas along these lines:

• She proposed a $5,000 baby bond to each newborn in the U.S.. After public mockery, she backed off the idea, but it likely remains on her agenda.
• She suggested government grants to the states to fund seven paid days of sick leave for all employees, public or private.
• She favors extending the coverage of the Family and Medical Leave Act to all businesses of 25 or more employees, down from the current exclusion of all firms with 50 or fewer workers.

But these programs are but the tip of the iceberg. Her presidency would bring with it a major expansion of government benefits, particularly in those flowing to the middle class. The potential of such legislation is to transform us into more of a European style nanny state social democracy and less of a free enterprise country based on self-reliance.

TERRORISM

Look for her to curtail the wiretapping without warrants by the NSA and to weaken the Patriot Act in important respects. Hillary will have to respond to the demands of the left to curtail programs like Guantanamo and aggressive interrogation techniques even though these steps would make us more vulnerable to terrorist attacks.

IRAQ

But don’t think Hillary would withdraw from Iraq! She won’t. If anything, she may increase our commitment there and extend it for many years.

As president, Hillary’s most pressing concern will be to show the world and her domestic audience that she is tough. Overcoming misconceptions of how a woman might govern, she will be at great pains to demonstrate her strength and firmness. These concerns, plus her own views on the Iraq situation, will keep us in Iraq for most of her first term.

Before Obama entered the Democratic primary and transformed a cakewalk into a potentially tough fight, Hillary was quite plain about her belief that our involvement in Iraq “entailed significant residual security commitments” that she felt bound to honor. Interviewed by the New York Times in March of this year, she suggested several of the missions she felt would have to continue under her presidency:

• Policing the border with Iran
• Hunting al Qaeda in the provinces
• Providing intelligence, logistical, air, and training support to the Iraqi Army as needed.

While she refuses to elaborate or to speculate on the size of the troop commitment which would be required, one can easily see her becoming committed to a policy of ongoing troop presence. And once we have troops in Iraq, we might have to send in more to protect the ones we have there.

It will be interesting to see how the Democratic liberal base takes to her Iraq policy. It is easy to see her becoming subject to the same kind of abuse and criticism as Lyndon Johnson was when he escalated our troop commitment to Vietnam after winning the 1964 election on a peace platform.

We hope it won’t happen. But if she does win, this outline will likely prove prescient – and depressing.

Hold on to your wallets!