Yglesias offers the GOP a fiscal cliff plan – giving in to Obama's demands:
[I]t continues to be the case that a scenario where the GOP just folds quickly and cleanly seems very unlikely. Democrats don't seem to have given much thought to that scenario, precisely because it would be amazingly out of character. But I'm increasingly convinced it would be the tactically savviest move. Surrender on middle class tax cuts, and fight on the sequester and the debt ceiling.
Steve Conover sees the coming debt ceiling fight as more dangerous than the fiscal cliff. His preferred solution:
The current, obsolete debt ceiling is set at a specific dollar level: “X trillion dollars” of debt — similar to setting a mileage limit for a car, which forces a hard stop when the odometer reaches some arbitrary number. A new, better way to limit the debt would be to switch our focus from the odometer to the speedometer, i.e., to set a target ratio for debt relative to the size of our economy — “X percent debt-to-GDP.” A car’s speedometer helps us keep miles-per-hour under control; a new measure for the debt limit would help us keep debt-to-GDP in bounds. It would create new incentives for lawmakers: all of a sudden, a “new” way to stay under the debt limit would be to implement growth-friendly laws and policies that help the economy grow faster than the debt grows.
That does seem more sensible, given the huge numbers involved.
But my overall view is that the most important thing is to increase revenues, not rates necessarily. I can understand why Obama wants to get the top rate back to Clinton levels – and it would require much deeper inroads against deductions than the GOP has previously accepted. But, pace Matt, I'd give on this if I were Obama – in order to see if the GOP could come up with removal of tax deductions for those earning over $250,000 that would bring in the same amount of revenue. If they don't want a rate increase, ask them how to get the same amount of money from the same group of people by ending deductions. Call their bluff – and show you are not wedded to redistribution that could even theoretically impede growth and entrepreneurialism.
I can see why Obama feels the way he does; and I wouldn't be fazed by a return to Clinton tax rates (which reflect a post-Reagan consensus, after all). At the same time, I see the political potency of magnanimity, especially with Obama's brand. The last meeting between the Congressional leaders and the president on the "fiscal cliff" was surprisingly congenial; Obama's victory was made possible by those calling themselves "moderates," i.e. the types who want to see compromise, not brinksmanship; the president's own debt commission favored more revenues via tax reform rather than rate hikes … so 39 percent is not a hill I would choose to die on.
Maybe that's naive. And I'm not a liberal Democrat. But the promise of Obama was always a pragmatism that could practically move all this country forward. If the Republican fever is broken, then give them some space, if not time, to climb down. I still favor the contours of Bowles-Simpson for the long term. Most of all because it is the only deficit-reduction plan that really, truly cuts the absurdly high level of military spending. Forcing the GOP to accept that may be more of a longer-term victory than getting the top tax rate back to something more realistic for long term deficit reduction. One of the biggest drivers of our current debt is the war-machine. Dismantle some of that and the savings are potentially huge.
(Photo: Boys jump from cliffs into the ocean on December 28, 2011 in Blairgowie, Australia. By Bruce Magliton/Newspix/Getty Images.)