Larry Kudlow addresses George Bush's "flexibility" on raising the Social Security cap figure. For a president who knows very well the importance of marginal tax cuts (and increases), this is indeed a change of heart. He was either caught off guard and began negotiating with himself (which he claimed he would not do) or he is hoping that his statement will force Democrats to jump onboard to help the reform process. Unfortunately I think they will simply seize on Bush's willingness to increase the cap amount rather than other positive changes Bush truly wants.

According to Kudlow:

Ironically, Harvard’s Feldstein argued that hiking the wage cap would create a dead-weight loss on the economy and would lead to significant tax evasion by small-business owners who have chartered as S-Corps or LLCs. Consequently, the net revenue gain from a wage-cap increase might be only $14 billion if the cap were hiked to $110,000. While damaging the economy in terms of rolling back incentives to work, this small revenue yield would do virtually nothing to solve the pending Social Security financial problem.

Fortunately, House Majority Leader Tom Delay has publicly stated that the lower body will not pass a Social Security tax hike of any kind — including increased marginal tax rates or a higher wage cap. Speaker Dennis Hastert and Rules Committee chairman David Dryer have indicated the same. They won’t touch a John Kerry tax-hike proposal, especially one that will inflict serious economic damage. This is good news.

So far that's the only good news regarding Social Security reform.