Tuesday, November 27, 2012

what could be done re fiscal cliff

Suggestion made to a guy I once worked with on the Hill, who was on the Democratic side...

... what kind of strategy could this Administration or its supporters take, to minimize
the damage to jobs?

I was really happy to hear the new estimate that unemployment will only go up a little more than 1 point after sequestration kicks in -- but even that could set a bad trend, and the probability does appear more than 50% right now, for many good reasons. Not least of them, the fact that the arguments against social security and medicare are very very specious. And that sequestration is not as bad as what would have happened if Romney had been elected.



an approach:

1. We are not trying to pass a new omnibus bill (like the Waxman climate bill) to replace
the sequestration bill. The sequestration bill was a true bipartisan approach, which deserves some respect. It is the starting point, the law of the land. We are not asking anyone to raise tax rates for individuals -- only to LOWER taxes relative to the existing law of the land. And of course no one will agree with cuts which are too low relative to the existing law of the land; that is a nonstarter.

2. As a matter of political reality, between the two parties, we will not ask for any change in the total amount of taxes, or  the total amount of government spending, versus the sequestration law now in force.  Nor will we vote for or approve any bill which changes total taxes or total government spending, versus what is already in the present sequestration law.  Thus we will introduce two bills, one to reallocate tax breaks from those which produce less jobs and growth to those which produce more, and likewise with government spending. (This will also make it clear exactly what people's priorities when they vote on those bills.)  We request a raise in the debt ceiling to go with this, to give us several year's breathing space, which should be acceptable after the great reduction in deficits mandated both by the sequestration law and by its total numbers which we will leave unchanged.

3. In parallel with these two bills, we will also work with the EU, China and the IMF to develop a new  international job creating effort, to create incentives and reduce permitting barriers for large new investments in renewable energy, in alternative liquid fuels and electrification of transportation, and in technologies to reuse carbon dioxide from flue gasses or from the atmosphere, to be funded from special drawing rights or the equivalent or bonds to be jointly supported by all three economic zones. We will do as much as we can without a new treaty, to get started, but will aim for a new treaty between those three areas, open to other nations signing up as well. Just as Germany's EEG law helped Germany perform better than other nations in this difficult period, a similar broader measure can play a critical role in reducing the damage of austerity to the world economy.

4. We would be open to attaching measures to automatically phase back in tax reductions for people receiving more than $250,000 per year, to take effect only in years after certain targets are achieved for lower national debt and lower deficits.


So if special tax breaks for oil as a 'distressed manufacturer' or a new carbon tax are to be traded for reductions in payroll tax or in AMT coverage, it would be nice to have a straight up or down kind of vote on that choice.


Just my personal views of course... about like the hard lessons we all learned about "sectoral measures."

And yes, it's a hard line on not reducing social security or medicare. Social security ALREADY has strong incentives to keep working until one is 70.
For those retire at 65, it is already much less in real terms than when social security came on line... and US per capita income
has not fallen since then! (Though if the President can think of true efficiencies to put into the "spending change" bill, that would be fine...)

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