John McCain has claimed that "the last president to raise taxes during tough economic times was Herbert Hoover." In fact, it was Ronald Reagan, and John McCain helped him do it.
One of the first major pieces of legislation John McCain ever voted on was the Social Security Amendments of 1983 at the height of the Savings and Loan crisis. The act was meant to shore up the increasingly strapped Social Security system. Then-Representative McCain voted for the act, despite staunch opposition by conservatives who warned it would cause economic deterioration.
In 1981, the National Commission on Social Security Reform, better known as the Greenspan Commission, was appointed by Congress and the President to study the short-term financing crisis the Social Security system was facing. The bipartisan commission issued a report early in 1983. Major provisions of the report included in the enacted legislation:
- Coverage of federal employees
- Social Security mandate for non-profit tax-exempt organizations; before January 1, 1984, participation had been optional for these organizations
- Provisions for cost-of-living increases based on the lesser of increases of prices or wages in the case of an impending shortfall in the trust fund
- An advance by one year of scheduled increases in the FICA tax rates; this meant an extra year of higher Social Security taxes
- An increase in the tax rate for the self-employed from the then 67% of the combination of employer/employee costs to the full 100% of the combination of employer/employee costs, with a partial offset
- The subjection of up to one-half of Social Security benefits to taxation, applied to single persons making over $25,000 a year and to married couples making over $32,000 per year.
- An increase in the age of eligibility for full Social Security benefits from 65 to 67.
The plan immediately attracted the active opposition of the AARP, the National Federation of Independent Businesses, the U.S. Chamber of Commerce, and a coalition of 25 federal employee unions. Many conservative organizations were also strongly opposed. The Heritage Foundation issued a policy brief entitled Wrong Rx for Social Security, warning plan would cause "longer unemployment lines, lower capital investment, and-slower economic recovery." Heritage claimed in a later piece that business and labor alike "are opposed to tax increases, which they feel are inappropriate at a time of high unemployment and slow economic growth."
After all, at the time, the nation was just coming out of the 1980-1982 recession. Yet it had already entered the great banking crisis of the 1980s and early 1990s, caused by a combination of the recession and banking industry deregulation. Forty-two FDIC banks had failed in 1982; in all but 5 years (all of these between 1975-1981) between 1943 and 1981, less than 10 banks had failed, and in no year had more than 17 failed. More than 40 banks failed every year between 1983 and 1993, with more than 100 failures in each year between 1984 and 1992. By comparison, only 40 FDIC banks have failed during the entire Bush presidency, 15 coming during the current year. Admittedly, several of these banks have been enormous, and the list does not yet include Wachovia and does not include AIG or any of the failed investment banks. Still, the 1980's crisis clearly holds its own in comparison to to the current credit crunch.
The Social Security Amendment Act was, of course, a reasonable bill, passed by a large bi-partisan margin. In the House, 163 Democrats and 79 other Republicans joined John McCain in voting for it, while only 54 Democrats and 48 Republicans voted against it. In the Senate, 26 Democrats (including Joe Biden) and 32 Republicans voted for it, while only 6 Democrats and 8 Republicans voted against it. That Greenspan's plan could pass by such a wide margin despite the diverse groups of powerful special interests opposing it is remarkable by today's standards. Moreover, support for the plan has been vindicated by history, as all the grim predictions failed to materialize. Still, it amounted to a tax increase during tough economic times. Senator McCain would do well to remember the famous proverb: "Those who live in 8 glass houses shouldn't throw stones."
Sources:
Williams, Juan & Rich, Spencer. "Social Security Rescue Plan Predicted to Pass Congress; Groups Voice Opposition." The Washington Post; Jan 17, 1983.