Mr. President:
It’s time for you to lead on the fiscal cliff. Climb out of the little red car, take off the clown shoes and exit the circus. Perpetual campaigns may play to your oratorical strength but they suck the life out of the people you are supposed to lead. Your current conduct undermines the very constitutional framework of co-equal branches of government that you are sworn to uphold.
It time for you to really heed the words of Dr. King:
Ultimately a genuine leader is not a searcher for consensus, but a molder of consensus. On some positions, cowardice asks the question, is it expedient? And then expedience comes along and asks the question, is it politic? Vanity asks the question, is it popular? Conscience asks the question, is it right? There comes a time when one must take the position that is neither safe nor politic nor popular, but he must do it because conscience tells him it is right.
Mr. President, we the people, are not complete idiots. If you raise tax rates on the infamous 2% we understand they will simply hide more income utilizing the plethora of deductions currently in the tax code. Deductions that ultimately undermine any attempt at progressivity in the tax code you claim to require. This isn’t about increasing revenue for the Treasury; it’s about being vain, expedient and popular. It’s about sticking it to the other guy, even though the people elected this House of Representatives as well. What it isn’t about is reasoned leadership required in this time of crisis.
One message of the tax rate battle is, if you are single and thinking about getting married –maybe you shouldn’t because the government penalizes marriage. Think about it, single making $200,000 could be subject to a tax rate increase, but married? Well it’s only $250,000. Taxes should be an individual liability and a “family” should not be a taxable entity. We should equally value individual effort.
As a brief aside, the policy flows from community property laws in individual states that encouraged married couples to file individual tax returns (splitting the income) to limit tax liability. Congress adopted a change that allowed all married couple to essentially split incomes (a rule adopted when most women did not work outside the home). The initial result was a drop in rates for married couples. In fact, this situation actually discouraged women from entering the workforce and was, of course, unfair to single filers. As Congress tried to address this to establish fairness, more and more women began to enter the workforce, and thus married couples began to face the marriage penalty tax. Common sense suggests it is an artifact and should be done away with.
Let me put this in some sort of context. It’s more than conceivable that you could have two civil servants (say Assistant US Attorneys), who work in a high cost of living area, so their salaries bust the $250,000 level – after all even the federal pay scale recognizes cost of living issues and pays locality allowances based on area (see http://www.opm.gov/oca/12tables/pdf/saltbl.pdf). They are not rich. They are raising kids, saving for college, paying a mortgage, and probably still paying off student loans. They have need for a bigger house, so their mortgage eats up more of their paycheck than the comparable single person. They are altruistic, believing in serving the public good and so they are not making the money they could make in the private sector. Maybe they are also military reservists, and this additional income really pushes them over the limit. Do we really believe these folks are the top 2% and somehow are sucking the life out of the rest of the nation? Why is nothing at least tied to cost of living? Wouldn’t that actually be the fair and progressive thing to do?
Not so long ago, Mr. President, you said reducing deductions could raise as much as $1.2 trillion dollars. So why abandon this for a rate increase that will probably never bring in the revenue you need? Why not be serious about these issues? You once ran as a transformative politician and the only transformation I have seen is you into a petty, narrow, and somewhat mean-spirited competitor. This is governing Mr. President; it isn’t a game of basketball.
It’s simple math that most households understand: Money in should exceed (or at least be equal to) money out. If a citizen is consistently charging $10,000 a month to a charge card (and only paying the minimum due), the fact that he suddenly reduces the excessive charging to $7500 doesn’t mean he is saving $2500 a month. He is still going into debt. He cannot turn around and say let’s invest that $2500 in something else because it doesn’t exist. It is just debt, red ink, and the quick trip down the bankruptcy expressway. Whatever peace dividend there is from our overseas drawdown is not money that suddenly exists to be spent Mr. President, it’s just less money we are borrowing.
We all understand this is a very complicated issue and the math is really, really tough. We can blame the war expenditures for the deficit, except that the truth is the numbers indicate, Mr. President, your spending has exacerbated the problem. Don’t forget about the $700 billion stimulus that didn’t work – you cannot blame that one on President Bush. But surely we don’t then include that number into a baseline moving forward do we?
So what to do? Well governing is always about finding the middle ground and making sure no one is completely happy (it’s called compromise not conquest). Increase revenue through capping deductions is a good first start. Then reform the entire bloated, 70,000-page code. But an increase in revenue is only part of the solution. You have to cut Mr. President. Yes, you can probably find more efficiencies within the Department of Defense, but you have to look everywhere. Entitlements have to be reduced. Means testing makes sense. Raise the retirement age– we are living longer than we did 30 years ago so this also only makes sense. Maybe we should re-baseline by going back to 2003 spending levels as an appropriate baseline – before the full war costs were exploding the deficit. But, a solution that calls for raising $4 dollars in taxes for every dollar cut, and then tries to sneak in additional stimulus spending isn’t a serious proposal, Mr. President. It was the equivalent of a clown squirting water from his fake lapel flower into the eye of an unsuspecting circus attendee. The clown gets a good laugh but the other guy? He just gets wet.
Mr. President, the most important lesson in leadership I learned was as a kid in my older sister’s office. She had a desk plate than put it this way: Lead, follow, or get the hell out of the way. Which is it to be?
Small Politics 
Since I agree with most of what you’ve said, I’ll just point out a couple of small disagreements. People do not live longer than they used to. The vast statistical majority of people live no longer than their late 70s, and that has been true of the elderly since the 16th Century. It’s just that fewer babies and children die of disease now, so more people live to grow into old age. Life expectancy calculation is entirely dependent upon infant mortality rates.
A more rational approach to raising revenue for Social Security would be to raise the cap on taxable income put toward it. Right now, every dollar earned above 110k is “free money”. But even the wealthy accept and cash their Social Security checks, and use Medicare once they qualify. Every dollar earned above the poverty level should therefore be taxed to support these entitlements. Perhaps a legal “opt-out” could be provided for top earners who don’t want to pay and also pledge not to withdraw from the system upon retiring.
I’ve got a question. Do you mean that the rich people aren’t already hiding as much money as they are allowed. That they could hide or shelter more but are choosing not to already? I really doubt that.
And, the increased rate on the top 2% is for the amount OVER $250K. So theoretically, if you are making $249K now, your tax rate shouldn’t increase, and even if you earn more, you would only pay the higher rate on the amount over $250K.
The only way to reduce the deficit, is to either spend less, or increase revenue, or a combination of both. Just raising taxes, or cutting spending, by themselves can’t and won’t do it. I’m all for means testing, more welfare and food stamp reforms. Along with doing away with corporate welfare such as farm subsidies, payments to oil companies, tax breaks out the wazoo…
Allowing the Bush tax cuts to expire was assumed in the Simpson Bowles plan. We have an aging population and rising health costs, we’re going to need more revenue coupled with spending cuts. Allowing the tax cuts to expire for the top marginal rate, what the president is proposing, would mean that a couple earning 250,000 or more will still be paying less in taxes than under current law (All Bush tax cuts expire). That doesn’t seem unreasonable to me. It is to the right of Simpson Bowles. The Republicans should jump on this, and offer support on the condition of 1) tax reform next year, which the president signaled he wants to do and 2) reighning in Medicare spending over the next 10 years, which could entail reforms to how its structured and/or strengthening some of the cost saving measures in the health reform bill.
The President has been pushing for the expiration of the Bush tax cuts for income 250,000 and above since 2007, his first campaign. He compromised with the Repubs on it in 2010, and expended it 2 years. He explicitly campaigned on this issue, whether its good policy or not, in 2012. In this context, insisting they expire as a condition for a deal does not seem “mean spirited”.
Matt
Matt:
Good comment, and mean-spirited was probably the wrong turn of phrase (and counter to my hope for open and polite dialogue, although the circus reference was intended to be humorous). My point was that having signaled a willingness last year to raise revenue through reducing deductions (something the Republican Congress is prepared to do) it seems counter-productive to then make raising rates a non-negotiable piece of a deal. Does it really matter where the revenue comes from? If it is truly about revenue then I think the President needs to be flexible about where the revenue comes from and by not being flexible he comes off to many as just trying to stick it to the Republicans. That cannot bode well for this issue and for any future negotiations he will have to have with this caucus. Further, why should the Republicans trust that if they give on this issue he will, maybe at some point in the future, come to the table on tax reform and entitlement reform. Both sides have to give and at least the Republicans have put revenue on the table. The President needs to put some meaningful, real cuts on the table. His current proposal presumes the spending cuts already made and the accounting gimmick of the “savings” from winding down overseas contingency operations (which were all financed on a credit card: see original post). Finally, we are running trillion dollar deficits so even if we raise rates as the President wants to do we will not bring in the revenue to move to a positive balance sheet without attendant spending cuts, and the President actually proposed billions in additional spending as part of his initial salvo to the Republicans. Hence the frustration.
Thanks for your comment. Counting the ‘savings’ associated with ending the wars has always been a gimmick and I wish the president would stop talking about that. It’s important to keep in mind, however, that 1 to 1.5 trillion dollars in cuts to spending on discretionary programs are already in place because the debt ceiling deal. Cutting further to these programs would be unwise, and not address the real debt issue, which is rising health care costs. There isn’t a magic bullet for rising costs, all that is currently being talked about to address health costs entail shifting federal costs over to states and individuals (like raising the age on Medicare eligability).
The Repubs offered 800 in revenue through closing tax loopholes. This was a reasonable opening, but the devil is in the details. If you’re commented to only raising revenue through closing tax deductions, then you’re talking about closing mortgage interest deduction or other extremely popular tax expenditures. I think this is a good idea for the long run, but would be a political mess to flesh out over the course of a month as no one has the political will to tackle those issues.
My guess is that that the president and Boehner will agree on raising rates half what they would otherwise be, and some cap on tax deductions. Obama offered an additional 400 billion in cuts to Medicare, Boehner wanted 800, they’ll probably end up in the middle of that plus additional discretionary cuts.