A Road Map for Avoiding the Fiscal Cliff
By Jessica Chau
Today we have a good article advocating for both increases in revenue as well as entitlement cuts as a sensible way out of the fiscal cliff, and some more news about the Gang of Eight and their prospects.
Bloomberg, Edward Glaser, 10/4/2012
. . . a bipartisan coalition of people in and out of government has been trying to figure a way out. The outlines of a consensus are emerging. Tax revenue in exchange for entitlement cuts offers the best hope. The challenge is to give each side enough incentive to withstand a backlash from its partisans.
Can it be done? As always, the hardest part will be getting Republicans to raise taxes. But even Mitt Romney, the party’s presidential nominee, says he might tax the rich more. Romney recently mused out loud that he would limit taxpayers to $17,000 in deductions; that could mean a hefty tax increase for the rich, depending on the details. With that in mind, here is a suggested 10-year road map:
● Raise the retirement age to 69 from 66 by indexing it to longevity. Adding one month every two years would bring it to 69 in the year 2075. Eligibility for Medicare benefits should also rise. Savings: $249 billion.
● Require more Medicare cost-sharing. Congress could discourage overuse by increasing deductibles and co-payments. It could also means-test Medicare benefits so that the well-to-do elderly pay more. Savings: $353 billion.
● Shrink cost of living adjustments. The consumer price index overstates the cost of living by not accounting for the cheaper product substitutions consumers make when prices rise. A better index, the “chained CPI,” captures such behavior. Savings: $232 billion.
● Raise taxes on the wealthy. The Bush tax cuts should be allowed to lapse for households earning above $250,000, returning the top marginal rates to those under President Bill Clinton. Congress should also adopt the Buffett rule, requiring millionaires to pay at least 30 percent in income taxes. Savings: $740 billion.
● End corporate tax breaks. We would end the 15 percent rate on profits earned by managers of private equity firms. Other options include abolishing a tax break for last-in, first-out inventory accounting and cutting oil and gas subsidies. Savings: $160 billion.
● Overhaul other government programs. Congress should eliminate some farm subsidies, reform the military pension system, require federal employees to contribute to their pensions at levels similar to private-sector workers, and have the U.S. Postal Service go to five-day delivery. Savings: $213 billion.
Scripps Howard News Service, Dale McFeatters , 10/4/2012
While most lawmakers are preoccupied with the election campaign, some members of the Senate, dubbed the Gang of Eight, have not been totally idle. — They have been quietly, sometimes secretly, searching for a solution, what The Hill newspaper called “the elusive grand deficit bargain,” to that potentially calamitous day when all the Bush tax cuts expire and $109 billion in automatic across-the-board spending cuts are to take effect, the much discussed fiscal cliff.
Their idea, quite a sensible one, is to draw up a plan to deal with that crisis so that when Congress returns for its lame-duck session following the election the members are not proceeding from a totally blank piece of paper.
However, the Gang of Eight — it was six but they picked up two more members — is up against the same impasse that stymied three previous attempts to address the deficit. Senate Democratic leader Harry Reid has said he is opposed to cuts in Social Security as part of any deal, and Senate Republican leader Mitch McConnell is equally adamant about no tax increases.