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Promising ideas on deficit and spending reforms could spur reasonable compromise
November 20, 2012 - Mike Maneval
As the U.S. inches closer to the so-called "fiscal cliff," a flurry of ideas - both good and bad - are seen for how to resolve and better correct the financial state of the nation. Hope for a reasonable compromise shouldn't be impossible - even in the wake of decades of collusion to relegate the working middle class to serfdom.
"In the last study done on income distribution, we learned that 93 percent of all new income generated between 2009 and 2010 went to the top 1 percent while the bottom 99 percent split the remaining 7 percent," U.S. Sen. Bernie Sanders, Independent from Vermont wrote in an opinion piece for Politico.
Sanders goes on to recommend some promising ideas for deficit reduction, including tax reform and ending corporate tax-code loopholes. Unfortunately, some of his prescriptions are not promising, such as his vow to fight alongside those "who want to prevent cuts in Social Security, Medicare, Medicaid," even after he acknowledges that unfunded expansion in Medicare benefits in the past decade contribute to the annual spending deficit.
John Boehner, the Speaker of the U.S. House, is steadfast that the rate of growth for Social Security and Medicare must be stunted as a condition for any change to taxation, Ramesh Ponnuru writes for bloomberg.com. Ponnuru believes the Republican caucus will put more than "just" higher co-payments and possibly raising the age of eligibility on the table. Boehner also indicates the methodology would have to be driven by changes in deductions and write-offs and not increased tax rates, with President Barack Obama countering that rates for top earners should increase.
But before the question of rates needs to be answered, a consensus to reign in deductions can be threaded together, from Boehner's line in the sand on deductions as the way to compromise, Sanders' focus on eliminating certain loopholes, and a third analysis by the Washington Post's Charles Lane, which looks at the state and local property tax write-off as one target for elimination, certainly a more popular target than charitable giving or the per-child tax credit. Lane makes the case the degree to which deficits can be reduced by eliminating tax deductions, citing a Tax Policy Center study that place the value of all itemized deductions at $2.2 trillion during 10 years. Lane also gives me greater hope that a compromise is possible, reporting that President Barack Obama would consider limits on the size of deductions, "perhaps by capping the rate at which deductions may be claimed," Lane writes.
With reform to deductions and loopholes, and restoration of older tax rates for unearned income - steps away from the sort of preferential treatment that has helped create the trends in the concentration of money lamented by the Senator from Vermont - Obama and his allies in Congress may be able to yield to Boehner's line in the sand on both the earned income tax rate and in cutting Social Security spending. Such a compromise would be both reasonable and promising.
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