Anti-tax crusader holds sway in debt debate

WASHINGTON (Reuters) - A hint of flexibility from one of the Republican Party's most ardent opponents of tax increases added to growing hopes on Thursday of a broad deal to rein in long-term U.S. budget deficits.

Anti-tax crusader Grover Norquist's comments to the Washington Post on former President George W. Bush's tax cuts marked a rare instance of nuance for a man known for his sledgehammer-like bluntness.

"I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub," Norquist once said.

Norquist's fervent belief that government should occupy a smaller role in U.S. society and his zeal for reducing taxes made his remarks to the Post all the more surprising.

Asked by the newspaper if allowing the Bush tax cuts to expire would constitute a tax increase, Norquist said he would not view it that way. "Not continuing a tax cut is not technically a tax increase," he said.

Norquist, head of the conservative group Americans for Tax Reform, later clarified his comment by putting a statement on his web site reiterating his view that the Bush tax cuts should not be allowed to expire. But he did not disavow his comment to the Post about the pledge.

Norquist, who got his start in politics when he was a 12-year-old volunteer on Richard Nixon's 1968 presidential campaign, has been a key figure in the Republican party since the 1980s.

He was an ally of former House of Representatives Speaker Newt Gingrich and also had the ear of many top advisers in Bush's White House.

More recently, Norquist has secured signatures of nearly every Republican in the U.S. Congress on his "Taxpayer Protection Pledge."

The pledge puts those lawmakers on the record as opposing all tax increases, even the elimination of loopholes or special deductions, unless they are "matched dollar for dollar by further reducing tax rates."

A GAME CHANGER?

Democratic officials, who insist that some revenue increases must be a part of any larger deal on deficit reduction, viewed Norquist's comments to the Washington Post as a potential game-changer.

Steny Hoyer, the No. 2 Democrat in the House of Representatives, described the comments as "very important."

Some Democrats say they could allow Republican House Speaker John Boehner to cut a deal with President Barack Obama that would include cuts in big social programs in exchange for some tax hikes.

"It sounds like a change of heart for him," said Jared Bernstein, a former economic adviser to Vice President Joe Biden and now a scholar at the Center on Budget and Policy Priorities.

Bernstein, who once debated Norquist on television, said the Republican activist was not someone who struck him as "particularly flexible."

But he added that the statement to the Post seemed to show some wiggle room.

Republican Douglas Holtz-Eakin, a former Bush adviser and former head of the Congressional Budget Office, said he has never been enthusiastic about pledges from elected officials, saying that politicians should "say what they believe and act accordingly."

But Holtz-Eakin also said the attention paid to Norquist's comments highlight the difficulty in long-term budget talks of adjudicating which steps would constitute tax hikes and which would not. For example, he said, there is debate over whether closing loopholes or increasing fees would represent tax increases.

"I could tell you how many angels could fit on the head of a pin. I don't know what is a tax increase," Holtz-Eakin said.

(Editing by Cynthia Osterman)