Fiscal cliff debate looking more like Thelma and Louise

When it comes to the fiscal cliff, President Obama and House Speaker John Boehner are looking more and more like Thelma and Louise. And John Boehner seems incapable of stopping the plunge.

President Obama has shown he is capable of compromise. Buoyed by his election results, he had said that an increase in the tax rate for “wealthy” people is non-negotiable.  He had defined the wealthy as couples with an income of $250,000 or more per couple.  Boehner agreed to new revenue in the form of loophole closing and eliminating of many deductions.  But, he insisted,  no rate hike. Obama adjusted his numbers to income of $400,000 or more. Then inexplicably Boehner said he’d increase the rate on those earning $1 million a year or more. And the Republicans, perhaps in a behind-the-scenes move to discredit Boehner and supplant him as Speaker, slapped that one down. Instead of moving closer to a deal, we seem headed inexorably to the cliff.

It’s true that the fiscal cliff is an artificial crisis, entirely of Congress’ own making. A two-or-three-day delay in resolving it might not mean Armageddon in practical terms. Psychologically, however, it would be devastating, an irrefutable reminder of just how badly broken Washington is. Automatic tax increases and spending cuts would kick in immediately.The markets would decline; recession, for some duration, would almost inevitably follow. And the ever-shrinking minority who still today have faith in Washington would see the ground knocked out of their belief that those we elect to D.C. are capable of anything. And it doesn’t have to happen.

Now Obama has offered a plan to stop the sequestration, what they’re calling a stripped-down offer to halt the Bush tax cut expiration for all but those with income over $250,000 and extend unemployment insurance. This leaves us tearing our hair out. The argument about the top tax rate is just Step One. The stopgap measure does nothing to deal with spending cuts and other systemic changes that are desperately needed. The President would have to get procedural cooperation from Republican leaders though they wouldn’t have to agree to the content of the stripped down version.

And when do we get to negotiating the hard stuff? Here, in no particular order, are ideas I’d like to hear Washington discussing more. For example, keep the mortgage interest deduction, but eliminate it on second homes. Alter all deductions and loopholes for the affluent, but do it cafeteria-style, simply setting a cap for what they can take. Keep charitable and other deductions, but have the wealthy choose which deductions they want to utilize up to the limit of the cap.

The two parties are split on entitlements. They’re at the top of the GOP hit list; Dems say hands off. Social Security has enough money now to cover outflow through 2037, but doing something now could prepare the nation for the looming demographic shift, where fewer and fewer younger workers are paying in to cover the benefits of seniors. The tax is paid only on the first $110,000 of individual income.  Why shouldn’t the Social Security wage base be increased or eliminated, as with Medicare?  Adjustments could be made for the self-employed, who are already hit with both the employer’s and employee’s tax.  But be careful in touching both Medicare and Social Security until there’s a full understanding of the impact of new taxes starting in January to fund the Affordable Care Act.

Instead of lifting the age of Medicare eligibility, why not give the government the right to negotiate prices with drug manufacturers? Get rid of farm subsidies, do away with the break on ethanol. There are probably a million good ideas out there. I’d like to hear yours.

Please share them in the comments section below.

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