Note to Obama: Shoot First, Compromise Later

(AP Photo/Pablo Martinez Monsivais)

President Barack Obama with Republican House Speaker John Boehner

I hope the president starts negotiations over a “grand bargain” for deficit reduction by aiming high. After all, he won the election. If the past four years have proved anything, it’s that the White House should not begin with a compromise.

Assuming the goal is $4 trillion of deficit reduction over the next decade—that’s the consensus of the Simpson-Bowles Commission, the Congressional Budget Office, and most independent analysts—here’s what the president should propose:

First, raise taxes on the rich—and by more than the highest marginal rate under Bill Clinton or even a 30 percent (so-called Buffett Rule) minimum rate on millionaires. Remember: America’s top earners are now wealthier than they’ve ever been, and they’re taking home a larger share of total income and wealth than top earners have received in more than 80 years.

Why not go back 60 years when Americans earning more than $1 million in today’s dollars paid 55.2 percent of it in income taxes, after taking all deductions and credits? If they were taxed at that rate now, they’d pay at least $80 billion more annually—which would reduce the budget deficit by about $1 trillion over the next decade. That’s a quarter of the $4 trillion in deficit reduction right there.

A 2 percent surtax on the wealth of the richest one-half of 1 percent would bring in another $750 billion over the next decade. A one-half of 1 percent tax on financial transactions would bring in an additional $250 billion.

Add this up, and we get $2 trillion over ten years—half of the deficit-reduction goal.

Raise the capital-gains rate to match the rate on ordinary income and cap the mortgage-interest deduction at $12,000 a year, and that’s another $1 trillion over ten years. So now we’re up to $3 trillion in additional revenue.

Eliminate special tax preferences for oil and gas, price supports for big agriculture, tax breaks and research subsidies for Big Pharma, unnecessary weapons systems for military contractors, and indirect subsidies to the biggest banks on Wall Street, and we’re nearly there.

End the Bush tax cuts on incomes between $250,000 and $1 million, and—bingo—we made it: $4 trillion over ten years.

And we haven’t had to raise taxes on America’s beleaguered middle class, cut Social Security or Medicare and Medicaid, reduce spending on education or infrastructure, or cut programs for the poor.

Mr. President, I’d recommend this as your opening bid. With enough luck and pluck, maybe even your closing bid. If enough Americans are behind you, it could even be the final deal.

Comments

Robert Reich's advice on the President's strategy for budget/deficit negations is, as usual from him, eminently sensible and practical. My view of the deficit challenge, is, however, that the United States of America will reach a declining Debt to GDP or balance budget, not so much by changes in tax rates, tax policy, or spending constraints, but more so by way of economic growth. The productive capacity of the US is gigantic, but what is more important is that it is capable of expanding more rapidly through its cultural proclivity to innovate and adapt. Americans are more likely to produce their way to fiscal balance than by way of tax burden reallocation. Of course this implies, as Prof. Reich, has often said, that Governments and the private sector cooperatively invest heavily in growth inducing factors like education, science and tech R&D, and efficient infrastructure. Furthermore, if Americans see their economy moving forward in productive capability, perhaps they will be slightly more willing to pay more taxes. Productivity is the basis of income growth, and rising incomes tend to make people more open to funding public goods, i.e. government in general.

You cant just raise taxes on the wealthy like this, 55.2%? Are you nuts. They drive the economy, were just going to see what happened to france, they all leave! The 1% already pays 75% of the total tax revenue, taxes should be raised across the board, not just dumped on any single group. A flat tax rate of 35% which is still lower then most countries would get the job done, and if a family is below a certain threshold income wise (say $30,000) they get discounted rates.

The fact that people always want to just ditch more taxes on someone else is ridiculous. If you started up a company, watched it grew and ended up making 100 million a year, how would you feel if someone came up, took 55.2 million of that away, then took away all your deductions on taxes, then to top it off raised your fees, added more taxes, theres no sense in living here.

America is a capitolist country, all this bullshit about spreading the wealth around, america is SUPPOSED to be divided monetary wise. People who put in hardwork, get a stroke of luck for the field they are in, they are the ones who succeed. If everyone wanted people to be equal in terms of wealth, there would be no wealth.

All you far left liberals can go to China, and all the hard right republicans need to get a sense of social values.

Im a libertarian and proud to be one. If someone wants to marry another gay, go for it. If someone wants to own a gun, its their choice. The person carrying the baby should have a say if they want a abortion or not, its not anyone elses concern. Drugs? Yes, its someone elses choice to do it.

Im sick of other people telling everyone else how to live their lives, and then go try and stick their greedy little hands into peoples money pots so they dont have to pay as much.

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