Thread: Economics The Fiscal Cliff Approacheth
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Old 11-25-2012, 01:33 AM   #232
Direckshun Direckshun is offline
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Clive Crook offers some mildly interesting thoughts:

Quote:
What would this offer of compromise look like? The main sticking point is tax rates. Democrats want to reverse the Bush administration’s tax cuts for couples making more than $250,000. Republicans say they are willing to discuss revenue increases, but refuse to countenance higher rates even for the rich.

The two sides should agree at once to restore the pre-Bush tax rates for couples making more than $1 million a year -- pending a comprehensive tax reform that raises revenue mainly by capping deductions. Under this formula, each side gains something and loses something.

Democrats gain a more progressive tax code, but give ground on higher rates for couples making between $250,000 and $1 million. Republicans limit the scope of higher marginal rates and get the commitment to the base-broadening approach they say they favor, but concede higher rates right now for the very rich.

On public spending, neither side wants sequestration. The immediate fix is simply to lift the threat of it. The forward- looking commitment should abolish the recurring calamity of the debt-ceiling procedure -- and, ideally, set an adjustable cap on federal spending as a share of gross domestic product. What that number should be, how to adjust it according to demographic or other circumstances, and what to do if it’s breached would have to be argued -- strenuously, no doubt -- next year.

The issue couldn’t, and shouldn’t, be settled once and for all. Mere convergence on the principle would be a notable, confidence-boosting achievement. In effect, it would be a promise to limit the scope of the fiscal wars -- a commitment to moderation.

As before, each side would be getting and conceding something important. Both would be renouncing the ambition to carry through a fiscal revolution -- either to shrink or enlarge the role of government, as the case may be -- in return for the same promise from the other side. Since neither party can expect to seize, much less retain, total control of Washington, that’s a worthwhile exchange of concessions. And never fear, in the composition of federal spending, Democrats and Republicans would still have plenty to argue about.

Between now and Dec. 31, the challenge isn’t just to avoid the fiscal slope. It’s to do so in a way that provides clarity and restores confidence. Another postponement isn’t good enough. There must be an exchange of concessions. The bigger, the better.
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