Thursday, November 24, 2011

We coulda had an agreement.

The Congressional “supercommittee” couldn’t agree on how to cut $1.2 trillion from our national debt. In the aftermath of failure, two columnists, one from each side, are both recommending Washington go for real cuts and some revenue increase, thereby grabbing the vital middle and success.

The New York Times’ Tom Friedman believes “the best way” for Obama to win next year is by declaring he “made a mistake in spurning his own deficit reduction commission,” and “is now adopting Simpson-Bowles” as his fiscal plan. Friedman rightly notes that any Obama-like short-term “stimulus” (tax cuts) won’t work, because “nobody knows what is waiting around the corner, after the stimulus runs out.”

Obama should instead back a deficit-cutting plan “with substantial tax reform and revenue (i.e., tax) increases. . . and cutbacks to both Social Security and Medicare. . . Simpson-Bowles.” Friedman adds that in times of crisis, “leaders jump first, lay out what truly needs to be done to fix the problem, not just to win re-election.”

His pitch to a higher goal, along with Friedman’s saying “I voted for Barack Obama, and I don’t want my money back” and “the Republican Party has gone nuts” are part of his effort to win back Obama’s ear, a task he gave up on earlier when he advocated finding a third-party candidate for president. No third party? No matter. The point here is Obama should embrace Simpson-Bowles—major, long-term cuts in the budget combined with some tax increase.

Over in the Wall Street Journal, columnist Holman W. Jenkins, Jr has pushed the same line, advocating that Obama should take GOP senator Pat Toomey's tax-reform plan and “pick it up and run with it, instantly redeeming the super-committee ‘failure’ with an act of presidential leadership.” Like Simpson-Bowles, Toomey’s plan emphasized getting economic growth through budget-cutting fiscal responsibility, combined with “a big revenue hike on ‘the rich.’”

Unfortunately, Toomey’s plan hit “the rich” by taking away $250 billion worth of their deductions, not by raising tax rates, the campaign pitch to which Democrats and Obama seem deeply wedded. Note that Simpson-Bowles similarly proposed raising revenue by closing loopholes, and specifically recommended lowering, not raising, tax rates.

Friedman talks to Democrats, so he quotes Simpson-Bowles, the commission Obama created. Jenkins talks to Republicans, so he quotes GOPer Toomey. Yet Friedman, Simpson-Bowles, Jenkins, and Toomey are all in the same place, with Obama somewhere else. I wrote earlier that Obama must advocate tax rate increases before the election, if he is to raise taxes enough on everyone after the election to keep the budget at its gigantic, current 25% of GDP.

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