My Solution

I figure since everyone else is weighing in with how they would fix the “fiscal cliff” mess, I should offer my two cents.  And you may not be surprised at what you read here.

I will start by saying that, at least on the surface, the President and Senate Democrats seem to hold most of the cards in this negotiation.  They have made specific proposals, whereas the Republicans really have not offered many specifics at all.  Instead, they just go on TV and rail against what the Democrats have proposed and turn tail and run.  That is neither leadership or governing, but that is to be expected.

My solution comes close to what the White House proposed yesterday, that Senate Minority Leader Mitch McConnell “burst out laughing” at when it was being outlined.  More tax revenue.  Check.  Yes, that means higher tax rates.  Cuts to spending.  Check.  The government wastes a lot of money on duplication and triplication, not to mention overpaying for things.  Yesterday’s offer from the White House included the following:

a $1.6 trillion tax increase, an extension of the payroll tax cut and unemployment insurance, as well as a request for $50 billion dollars in new stimulus spending for fiscal year 2013. (source)

The only real issue I have with that proposal is the $50 billion in new spending, even though it is for infrastructure improvements.  I would rather they eliminate that from the proposal and find that amount elsewhere in the budget.

If nothing is resolved by the end of the year, our tax rates will revert to what they were when President Clinton left office.  Across the board, for all income levels, taxes will increase.  This is not necessarily a bad thing for Democrats.  They will get the tax increases they want, and will be in a position of strength to then negotiate a retroactive tax cut for those making below $250,000; either way, it looks like those making above that amount will see higher taxes in 2013, and the situation is a little less clear for those of us who make less than that.  From what I recall, when President Clinton left office, our economy was robust and growing, and our government had a balanced budget and was paying down the debt annually.

Yes, a higher tax rate on my pay will affect my household budget, but looking at the long-term picture, that might not be a bad thing.  If the economy returns to where it was when Clinton left office, I will be making more anyway.  And for all of the talk about higher taxes hurting “job creators” (rich people), I would like to point out that, with a higher tax rate in January 2001 when Clinton left office, unemployment was at 4.2% (source).  If higher taxes make it to where “job creators” create fewer jobs, why was unemployment so low back then?  Did it have anything to do with the robust economy creating more demand for products and services, thus creating the demand for more jobs?

The root of the problem in a deal not being made is that neither side really wants to work together.  If they were serious, something would have been done already.  Maybe they should be forced to do one of the following: be locked in a room with a certain amount of food and water provisions, say 3 days, and hammer out a deal.  No leaving until a deal is done; take to the skies for negotiations, and they would have until the plane ran out of fuel to make a deal.  No deal when the fuel runs out, sorry about your luck.  Do you think that would expedite the process?  Or they could do something less drastic that may not eventually lead to starvation or plummeting from the sky, and they could stay in Washington until the job is done.  No Christmas recess.  If they want to be home in time for Christmas, get something accomplished.  Just because this will be the least productive Congress in history does not mean they cannot get this done before the end of the year.

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One Response to My Solution

  1. Pingback: Bringing The Pain « Our Not So Expert Opinions

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