JUNE 7, 2012 8:13PM

Of Fiscal Policy Cliffs & Obvious Answer: Simpson-Bowles

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It's unfortunate that everyone now calls the tax increase part of the well-labeled "fiscal cliff," the fiscal cliff being an intersection of large tax increases from current levels and Pentagon spending cuts. the Bush tax cuts.

That part is unfortunate because about 30 per cent of the population hates the name Bush, whatever merits there are in any particular policy measure associated with that President.

As to the tax cuts in question, it is also unfortunate that because of budgetary scoring rules and what amounts to philosophical differences over the impact of tax cuts on government revenue, the original changes in tax rates by the Bush Administration had a cliffhanger element built into them by lapsing after ten years.

Thus, once that ten year period lapsed, every year at the end of the year we have the same debate over the dreaded "Bush" tax rates, although he's now long goine, which often have about as much to do with how one reacts to Bush as to the merits or demerits of said rates.

On the flip side of that, because the lapse of rates conjoined to the cuts in spending in the Pentagon would be truly large negative macroeconomic shock, there is an incentive even in an election year to avoid another economically harmful six months of speculation over the future of tax rates and military spending that is in the title of the post: the Simpson-Bowles commission appointed, by President Obama in 2010.

In essence, the results of the Commission were to compromise certain basic prinicples of taxation, maintaining progressivity in rates for obvious political reasons as to Democrats, while extending the tax base in order to have the government distort economic decisions less solely because of reasons of tax avoidance as to Republicans.

It's imperfect but reasonable, in which the alternative of smashing the economy out of some alleged principles and hoping putting the pieces together gets to be done by your side is unreasonable folly.

Since there is unlikely to be any budgetary plan that could be advanced in an election year that wouldn't be swamped by partisan envy as to who gets credit to save the day, given the statements of Speaker Boehner, it should be possible for the President and the Speaker to negotiate a deal on the basis of the original commission's report, since the President has the cover the bipartisan character of the report, as does the Speaker, and neither really has much incentive to leap off a fiscal cliff, and hope the net appears after the Presidential election.

finis

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I'm really starting to worry about you. You blog 4 times here in one day, a frenzy of writing, and you wrote that crazy Afghanistan post last night, in the middle of the night, when the demons come out. If you read that Afghanistan post with clarity and judiciousness you know it is unbelievably extreme. As a political scientist you know that the Amerikan political process is hedged in by all kinds of compromises in its evolution, so there is no room for that kind of extremism in everyday reality. I just don't know what to think now...you know I love to push buttons and say extreme things myself but I'm a joker, and you take yourself extremely seriously. I will pray for you...well, since I'm an atheist I'll have to get my Kristian friend to do the prayin'...wink
I don't know what you are talking about, as that Afghan policy piece is one of three options; Defeat, some deal, or then shape the environment in a way that serves our interest, which is clearly not having China have a path around the U.S. Navy, or having Russia totally dominate Central Asia, or Pakistan turn it into Al Qaedaland part deux, especially the latter. People are sick of the bs with this I think it is fairly clear, and one form of closure is of the Roman style, make a desert, and call it peace. You'd rather not, but if people are doing carbombs and IEDs by proxy, who do they think they are kidding if they get upset about upping the ante on the same moral terrain? No one.
That's not a frenzy of writing as to four posts, as its in my head as to certain obvious things on money and budgets. Obvious things based on years and years of work in those fields.
Just as it is obvious that the endgame of Afghanistan is starting, and we need to finish well, no helicopters on roofs, if only to save non-combatant life from being stuffed in boxcars in the desert, something the locals like to do, and preferably cooperatively with the Great Powers with interests at stake there, but if people don't think they want to do that, and try to bleed us into a collapse, especially of morale, then maybe they need to rethink what it is we will do in a pinch, when it really matters, which in this case I think it obviously does. It's not nice, but then neither is arming proxies to kill American soldiers and Afghan non-combatants as if it were a game of chess.
Donny, I enjoy your writing but as to Afghanistan I just don't understand your thinking. It is clear that, as signalled in the NATO meeting in Chicago, that the NATO countries are hitting the exit door. That means that indeed the Taliban will be emboldened and very soon only continued US aid to the Kabul Karzai regime will be standing between the Taliban on one side taking it all and a rump Northern Alliance regime on the other side struggling on. But you invoke the use of STRATEGIC BOMBING by the US in Afghanistan if it looks like the Taliban is prevailing in the civil war that will probably consume Afghanistan once Western troops exit. What you completely ignore in your analysis is the rapidly diminishing interest in and commitment to building a stable government in Afghanistan...the nation building enterprise that the US is now disentangling itself from. Only Special Operations, counter terror programs will remain, everything else is being wound down. So the US is tacitly admitting defeat of its grandiose plans in Afghanistan and will soon be pre-occupied by Syria/Iran and al-Qaeda throughout Africa, and Pakistan, China, etc. No one will care enough about your strategic considerations in Afghanistan to intensify the war there to the extent you propose. So, no deal with the Taliban, obviously, since they are expecting to be strenghthened by NATO withdrawal and they have no incentive to deal, and no escalation of US involvement there either. So, as you say, either complete defeat for the US, or a prolonged stalemate/civil war between Kabul/Karzai and the jihadis.
And what I have outlined has nothing to do with what I prefer or what you prefer. At a time of great economic turmoil, and political gridlock in the US, and when the kountry is approaching the fiscal cliff, you must be fantasizing to imagine US STRATEGIC BOMBING in Afghanistan to make it a desert and call it peace. You are exhibiting tendencies to greater and greater unrealism Donny, and you can't even see that about yourself.
Y-Y, clearly don is gone. his delusions have replaced reality - he is so enamored by his own words that he just keeps cranking out worthless cr*p.

It's almost is like he just takes a bunch of swords, heaves them at a wall, and whatever sticks he appends a "finis" to it and thinks he's said something.

finis
This piece by the way of course has no mention about the potential threat of selective use of strategic bombing in Afghanistan or arming parties as a denial strategy, of doing such in Pakistan or Iran, more to the point in the latter cases, as to exiting by shaping things, as it is about the budget debate. And after all, since the Obam Administration wanted to do Afghanistan instead of Iraq, who therefore is giving that side reasonable non-partisan advice than a humiliating national defeat? I didn't say necessarily do that, just that since it has been done before, and there seems to be a possibility that some people there think we're squeamish in comparison to others who have been there, one could say that perhaps one should consider on a very selective, on a totally recalcitrant won't get the point basis, we're not that squeamish as to measures, so rethink that idea, as ideally, one of course wouldn't leave a desert and call it peace, which however in some cases, like with Scottish tribesman, the Romans found it optimal to do, at least near the walls.