Is This a Realistic Time for a “Grand Bargain?”

June 17th, 2013 at 9:42 am

Paul Krugman makes a point this morning that I’ve been making around here a lot lately: even if you still long for a balanced (meaning not just spending cuts but also tax revenues), sustainable budget deal–what folks around here call a “grand bargain”–you really have to ask yourself if the current cast of Congressional characters are the right folks to broker that deal.

Importantly, as the fiscal picture has improved, both through actions we’ve taken already–$2.5 trillion in deficit savings over the next decade–and the improving economy, it’s much tougher to make the hair-on-fire urgency case that drove this benighted debate in recent years.

Still, while a “grand bargain” that links reduced austerity now to longer-run fiscal changes may not be necessary, does seeking such a bargain do any harm? Yes, it does. For the fact is we aren’t going to get that kind of deal — the country just isn’t ready, politically. As a result, time and energy spent pursuing such a deal are time and energy wasted, which would be better spent trying to help the unemployed.

Put it this way: Republicans in Congress have voted 37 times to repeal health care reform, President Obama’s signature policy achievement. Do you really expect those same Republicans to reach a deal with the president over the nation’s fiscal future, which is closely linked to the future of federal health programs?…

When will we be ready for a long-run fiscal deal? My answer is, once voters have spoken decisively in favor of one or the other of the rival visions driving our current political polarization.

I think that’s right.  One way our current dysfunction gets solved is when a majority of the electorate sends a clear message to legislators about the size, role, and functions of government they’re willing to support.

Obviously, that sounds easier than it is.  There’s just a tremendous amount of noise corrupting that critical debate.  For one, most politicians tell us we can have what we want without paying for it.

If you’re conservative, you cite supply-side fairy dust (“all we have to do is stop paying taxes and we’ll get everything we want!”) or the magic of the market (“give seniors cheap vouchers and health insurers will sell them awesome coverage!”).

If you’re liberal, you at least recognize that new tax revenues have to be part of a future where an amply funded public sector can meet the challenges we face, but you pretend that can be achieved by raising taxes only on the wealthiest 1% of households.  That may be politically expedient but it’s fiscally inadequate.

So, first clear out the BS—and I ain’t talkin’ about Bowles-Simpson—and then we can have a realistic talk about the size and role of government.   And yes, that also sounds a lot easier than it is.

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3 comments in reply to "Is This a Realistic Time for a “Grand Bargain?”"

  1. JFC says:

    Middle class tax increases? I begrudgingly agree. I would recommend caps on the various deductions. That way high earners would definitely pay more. But the cutoff could be pegged at a point where the lower end of middle income tax payers wouldn’t pay more. We could include mortgage interest, property taxes and employer health insurance. I also think that income is income. There’s no advantage, economically speaking, to granting special rates to investment income. That would mean taxing one of my personal favorites: municipal bond interest.


  2. Pinkybum says:

    “If you’re liberal, you at least recognize that new tax revenues have to be part of a future where an amply funded public sector can meet the challenges we face, but you pretend that can be achieved by raising taxes only on the wealthiest 1% of households. That may be politically expedient but it’s fiscally inadequate.”

    I’m sorry but you are wrong – the top 1 percent earn 23-24 percent of the income. Not only that but most of that income is expendable. That income could easily be taxed at say a (historically not very high) 50 percent rate and then we could pay for everything. Note that 50 percent of that income is about $700 billion. Say the collection rate on the rich is about 20 percent then we could easily boost tax revenues by about $400 billion. Also, we could hit up the wealthy with transaction taxes on shares of stocks, capital transfers etc. All only having marginal effects on the running of our economy (as has been historically proven) and benefiting the vast majority of people.


  3. Perplexed says:

    – “When will we be ready for a long-run fiscal deal? My answer is, once voters have spoken decisively in favor of one or the other of the rival visions driving our current political polarization.”

    “I think that’s right. One way our current dysfunction gets solved is when a majority of the electorate sends a clear message to legislators about the size, role, and functions of government they’re willing to support.

    Obviously, that sounds easier than it is. There’s just a tremendous amount of noise corrupting that critical debate. For one, most politicians tell us we can have what we want without paying for it.”

    It’s extremely naive to think that voters can change this situation by “sending a message to legislators” who are not and will not be responsive to those messages. This is not about “talk” and “voices,” its about power & control over the incentives those legislators respond to. Replacing one legislator with others pre-filtered by the plutocrats will change nothing. “Voters” must wrest back control over who is eligible to be elected by them and what incentives they respond to if they truly want to be “self-governing” at some point in the future; they are not now.

    Its the very first step, and therefore the most important. It won’t change if “We the People” don’t get focused on it in huge numbers:

    http://www.ted.com/talks/lawrence_lessig_we_the_people_and_the_republic_we_must_reclaim.html
    &
    http://billmoyers.com/episode/full-show-big-brother%E2%80%99s-prying-eyes/

    Some have to “lead the charge,” and “We the People” have to find them and allow them to do so. Its too important for us not to.


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