The Supercommittee:  candidates for the dustbin of history

Image: somewhereinthemiddle.blogspot.com 

One point two over ten.  It’s that simple.  One point two trillion dollars over 10 years was the goal they faced, the goal at which they failed. The failure was a surprise to no one.  One poll showed that 84 percent of Republicans called the committee to fail well in advance of today’s deadline.  And in the end, they didn’t even make it to the finish line, throwing in the towel on Monday because they had no proposal worth reviewing in the 10^th and 11^th hours.

            Of course Republicans knew they would fail, because maintaining the Bush tax cuts was sacrosanct, come hell or high water.  With the specter of Grover Norquist at their shoulders Republicans pulled out nothing but smoke and mirrors revenue projections that amounted to taking tax breaks and credits from the middle class and the poor in order to increase the take home pay of the rich by four percent, according to one analysis offered by The Center on Budget and Policy Priorities of the Patrick Toomey plan, the last big picture proposal to be advanced by the Republicans.

            That plan called for $890 billion in cuts and $250 billion in fairy-tale revenue “enhancements.”  Truth is, it contained large tax rate cuts that would have permanently enshrined tax cuts for the, you guessed it, One Percent, capping their rates at 28 percent.  You have to ask:  where do these guys get off?

            Recriminations and blame over the supercommittee’s failure began on Monday, the minute failure was announced, but now it looks like we’ll have to wait out an election cycle to get back down to work.  The whole question will be thrown back to voters, who, if recent history is any indication, will tend to favor “no new taxes forever,” unless some serious head-cracking and voter education efforts finally get through where logic has failed in the past.

            The supercommittee solution that wasn’t?  It’s simple. It’s fifty-fifty.  That’s what compromise is.  To get to the magic number of $1.2 trillion it’s cut six hundred bills and and raise six hundred bills.  Here’s how…

Revenue

            We can’t recover the revenue lost to Bush-era faith-based economics without reversing part of the Bush income tax cut and the capital gains tax cut.  Capital gains taxes are abominably low, low enough to encourage short-term market speculation at every turn.  The idea that propelled these cuts, that this was some kind of “double-taxation” is nonsense.  Money is taxed when it is in play.  It’s taxed when you earn it and it’s taxed when you spend it.  It’s also taxed when you invest it in the stock market and make money on your bets.  That we don’t get this as a platform for potential revenue is just plain stupid.  The current rate of 15 percent is a giveaway.  And it’s a giveaway that benefits only the wealthy.  Retirement investors whose assets are in qualified plans won’t face this tax.

            So we increase the capital gains tax from 15 percent closer to 22 percent, earning an additional couple hundred billion over ten years.  Then we partially reverse the Bush income tax on all incomes over $200,000 a year, yes, $200,000, not $500,000, to a sufficient level below the Clinton-era rates to make up the difference needed to get us to a total revenue target of $600 billion. That might be a top rate of 33 percent instead of 28 percent. CBO can crunch the numbers and we’re on our way to the next step—painful budget cuts.

Budget Cuts—this is gonna hurt a little

            So-called entitlements is the name of the game when it comes to cuts.  We can’t escape that; it’s where the money it.  If we are going to ask everyone to take a hit, then we have to go to the largest line items on the ticket.  Some of these cuts are behavior changers, culture changers, even, and they are going to hurt families.  But if we don’t cut a little at the margins now, we face disastrous and deeply unfair cuts in the future.

            The Toomy plan called for Medicare eligibility to be pushed back to 67 from 65.  We should split the difference and call it a deal at age 66.  This acknowledges the reality that life expectancy has increased significantly since the original age guidelines were enacted.  So everyone who has or can find a job works another year.  I don’t like it, but if we don’t compromise on this, we face a world of political and economic hurt from an opposition that would just hand out vouchers—and may well do just that if Paul Ryan ever becomes Secretary of Health and Human Services.  We need to cut just enough to save $165 billion over 10 years. If we cut farm subsidies by $20 billion over ten years and increase Medicare premiums slightly above  current baselines we might be able to raise the Medicare age by just six months.

            Next, we accept another part of the Toomy plan:  less generous cost-of-living adjustments for Social Security.  Specifically, we should limit the calculations to cut the growth in cost of living adjustments by up to 10 percent.  In 2012, the Social Security cost of living increase is scheduled to be 3.5 percent.  A rate of 3.15 percent would not starve any senior in and of itself.  It might save $160 billion over 10 years.  Yes, this causes Social Security recipients to fall below the Consumer Price Index basis of inflation in a manner that is compounded over time.  On the other hand, many of the parcels of product categories used for the determination affect seniors in oblique ways given the relative stability they face in health care expenses, housing and transportation costs.

            Over time, as we consider the wisdom of increased defense spending, we can balance that against Social Security indexing and make real-world decisions on the value of military solutions to political problems versus the welfare of retirees.

            Speaking of defense, it comes in well-behind so-called entitlements in terms of annual expenditures, but represents an economic iceberg in that the Bush administration decided to fight two wars without paying for them.  So we should cut military personnel by 25,000 troops above the 50,000 troop reduction already planned by the Pentagon and cut the military emerging technology budget by 20 percent.  If the Pentagon prefers, it can save troops by cutting a much smaller number of independent contractors of the variety that routinely makes $200 an hour.  This will save roughly $275 billion over ten years, about half of what would be cut under sequestration.  These types of cuts were enacted at the end of the Cold War and we all survived just fine.

            This isn’t to say that we need to stop here.  We do need reform of corporate taxation loopholes so that the 300 Fortune 1000 corporations that are collecting cash credits from the government will pay something meaningful.  We need to balance tax rates against loopholes so they pay at least something.  Sheesh, we’ve been stupid.  They view their tax accounting departments as revenue centers for God’s sake!

Send It Out to CBO

            If we send this prescription for a new balance out to CBO they can supply the numbers to tweak around the edges—it’s not that hard, really.  What is hard, if not impossible, is breaking through the Republican refusal to address taxes.  That is why—metaphor alert—we need to make hard choices on the left and then dig in our heals for as long as it takes to fight the moral equivalent of a political civil war over taxes.  (Remember, it’s a metaphor.) But as a metaphor, that’s how bad it will have to get before we break our stalemate.

            Already, the nanothread of Republican logic is beginning to fray in the face of confronting escalating poverty, destroyed lives, and through-the-roof income disparities.  Can you believe Paul Ryan just released a paper on—get this—income inequity—last week?  But this will not be resolved in 2012.  I have suggested previously that this won’t be resolved until 2014, by which time the pain of the unemployed will have spread like gasoline through a body politic that will continue grow restive and angry in the interim.  Republicans must be made to think twice about overplaying their hand in this environment.

            It is mindboggling to think back that we survived just fine in the Clinton years, when the economy was humming and taxes were way, way higher than they are today.  And today, nobody, not a soul, advocates a return to taxation at that level.  We just need to swing the pendulum back somewhat, especially for the top five percent who are so blessed with wealth under our economic system, so we can survive as a nation with a balance of revenue to commitments.

            If not.  If not…well, the real outcome, the real endgame, is a story of either getting very, very, lucky as our economy inexplicably comes roaring back to life, kicking off sufficient tax revenues in the process—or we confront economic stagnation that takes the whole country on a field trip to Japan in the 90s…Argentina in the 80s…Germany in the…hmmm, never mind.  There’s always Greece.  Between a rock and a hard place, the best direction is up.  And it may become easier to move in that direction if we can smash the gridlock we face on—make no mistake—one side of this equation.  Taxes.  Taxes. And Taxes.  Put the difficult cuts on the line and then hold the line, through 2012, 2014, 2016, whatever it takes—until the worm turns on a bankrupt political philosophy and Grover Norquist becomes a dirty word.