Monday, December 3, 2012

The Fiscal Cliff talks should be more transparent

One frustrating part of the current "fiscal cliff" talks is that I can't really tell what's being proposed.  Both sides are being coy, because they don't want to get called out for actually proposing any real solutions like raising tax revenues or cutting entitlements.

For example, Geitner's / Obama's first proposal included 1.6 trillion in tax increases, plus at least 50 billion in additional spending, with the proposal to "somehow" find 400 billion in savings in Medicare at some unspecified later time.  If you really think a Democratic administration will find and implement 400 billion in savings in Medicare, I've got a bridge in Brooklyn to sell you.  This proposal isn't serious or specific.  The New York Times, hardly a right-wing bastion, calls it "loaded with Democratic priorities and short on detailed spending cuts".  It points out that the proposed tax increases go beyond what the Democratic Senate approved, such as taxing capital gains at regular rates and potential increases the Estate Tax.  Some of the "savings" Obama is trumpeting include "savings" from the military withdraws from Iraq and Afghanistan.  Nobody was planning to spend any money to stay there, so it's hard to count that as savings.

From what I can tell, the Republican counter-proposal calls for 800 billion in enhanced tax revenues, through unspecified cuts in deductions.  As an aside, I like the Economist's proposal (loosely based upon one of Romney's few good proposals) to skirt the issue of targeting any particular deductions, which will draw way too much controversy from special interests, by just limiting deductions to $50,000 total a year.  About 300 billion of these possible savings are investigated by Paul Krugman.  And his ideological opposite, the National Review, is calling for the negotiations to be held in public.

I agree.  Let's have the negotiations be, at least more public so both parties will be more accountable for what will happen.  Now, it seems painfully obvious to me.  On the revenue side, any 5th grader could look at the situation and say "o.k., 800 billion in enhancements through less deductions, 800 billion in tax increases".  Unfortunately, our Congress isn't that smart, nor apparently is Obama very serious about fixing our fiscal problems.



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