Opinion

sg-fiscalCliff-opinion

Twitter has been rather amused by <a href="/topics//Starbucks_Corp">Starbucks</a>' plan to solve the "fiscal cliff" by scrawling "come together" on every peppermint mocha and salted caramel latte sold in the Beltway. 
 But I want to take the project a bit more seriously. I should say, at the outset, that I admire the effort: People and CEOs should want to be engaged in American politics, they should be angry at what they see happening and they should be trying to figure out ways to pressure politicians to make things work better. 
 But the specific sentiment - what you might call the ideology of "come togetherism" - is, ironically, one of the big reasons that nothing in Washington ever seems to get solved and that the two sides never seem to come together. 
 I think the way to start here is by being specific. So here are three facts about the budget debate we've been having over the last couple of years: 1.) Simpson-Bowles, the bipartisan debt reduction plan that's often held up as the platonic ideal of coming together is, by any reasonable accounting, far to the left of anything the <a href="/topics//White_House">White House</a> has ever proposed. It's got $2.6 trillion in tax increases. That's more than twice as much as what the <a href="/topics//White_House">White House</a> is asking for. It's got more defense cuts than the administration ever even considered. 
 I think it was a mistake for the White House not to have done more to build on Simpson-Bowles. But part of its reluctance was based on the belief that there was no way the <a href="/topics//U.S._Republican_Party">Republicans</a> would ever come together around the plan. House Budget Chairman <a href="/topics//Paul_Ryan">Paul Ryan</a>, R-Wis., for instance, was on on the Simpson-Bowles Commission, and he voted against the plan, as did every other House <a href="/topics//U.S._Republican_Party">Republican</a> on the panel. The <a href="/topics//White_House">White House</a> saw no reason to embrace something that raised taxes sky high and slashed defense and would never pass. 
 When the White House brought out its budget alternative, it included fewer taxes and fewer defense cuts. It was a framework that administration officials thought had a better chance to move the country toward a deal. Meanwhile, the <a href="/topics//U.S._Republican_Party">Republicans</a> brought out the Ryan budget, which was an exercise in conservative fantasizing. 
 2.) In 2010, Republicans won the mid-term election. In 2011, to end the debt-ceiling standoff, the White House agreed to a deal that was all spending cuts. It's called the Budget Control Act. It's law right now. And it cuts spending by $1.5 trillion over the next decade. There is not a dollar of tax increase in the whole bill. And <a href="/topics//U.S._Democratic_Party">Democrats</a> "came together" with the <a href="/topics//U.S._Republican_Party">Republicans</a> over it - and they added in sequestration, an all-spending cuts enforcement mechanism to get a bigger debt deal, for good measure. 
 3.) At this point, even after winning the election, the White House has moved much further toward House Speaker <a href="/topics//John_Boehner">John Boehner</a> than <a href="/topics//John_Boehner">Boehner</a> has moved toward the White House. 
 From its first offer to its last offer, the White House has dropped its ask on taxes by about $350 billion. It raised the proposed spending cuts - including reduced spending on interest - by $400 billion. It dropped the demand on stimulus from $425 billion to $175 billion. It dropped the demand to end the debt-ceiling forever entirely. 
 <a href="/topics//John_Boehner">Boehner</a> has increased his offer on taxes by about $150 billion. He's dropped his spending cuts by $375 billion. He's never offered significant stimulus. He's never offered a major concession on the <a href="/topics//US_National_Debt">debt ceiling</a>. 
 So in every category, <a href="/topics//Barack_Obama">Obama</a> has moved further toward <a href="/topics//John_Boehner">Boehner</a> than Boehner moved toward <a href="/topics//Barack_Obama">Obama</a>. And yet, it's Boehner who walked from the talks with his plan B, failed to pass it, and then handed the problem off to the <a href="/topics//U.S._Senate">Senate</a>. 
 I don't think you can look at the last three years and say the White House hasn't tried to come together with the Republicans. 
 I also don't think you can look at the last three years and say the Republicans have tried to come together with the White House. 
 The check on that sort of behavior is blame. If Republicans are being intransigent and the American people want compromise, then, in theory, the Republicans will get blamed. And that does seem to be happening: The <a href="/topics//U.S._Republican_Party">GOP</a> polls terribly, and they lost the 2012 election. 
 But at the elite level - which encompasses everyone from CEOs to media professionals - there's a desire to keep up good relations on both sides of the aisle. And so it's safer, when things are going wrong, to offer an anodyne criticism that offends nobody - "both sides should come together!" - than to actually blame one side or the other. It's a way to be angry about Washington's failure without alienating anyone powerful. That goes doubly for commercial actors, like <a href="/topics//Starbucks_Corp">Starbucks</a>, that need to sell coffee to both Republicans and <a href="/topics//U.S._Democratic_Party">Democrats</a>. 
 That breaks the system. It hurts the basic mechanism of accountability, which is the public's ability to apportion blame. If one side's intransigence will lead to both sides getting blamed, then it makes perfect sense to be intransigent: You'll get all the benefits and only half the blame. 
 The two parties are not equivalent right now. The two sides are not the same. If you want Washington to come together, you need to make it painful for those who are breaking it apart. Telling both sides to come together when it's predominantly one side breaking the negotiations apart actually makes it easier on those who're refusing to compromise. 
 Klein is a columnist at The <a href="/topics//Washington_Post_Company">Washington Post</a>. His work focuses on domestic and economic policymaking, as well as the political system.

Commentary

OPKLEIN31

Klein: Coming together won't solve the 'fiscal cliff'

Capitol Dome Cropped

Cowardice and calculation are the norm in <a href="/topics//Washington,_D.C.">Washington, D.C.</a>, today. 
 Compromise is long out of fashion. And memories are short. It’s a shame. But don’t blame conservative <a href="/topics//U.S._Republican_Party">Republicans</a> (leaving their feckless leaders aside) for doing exactly what they said what they would do. 
 Just how unserious is the “fiscal cliff” debate? So unserious that <a href="/topics//Barack_Obama">Obama</a> can’t seem to remember how we got into this mess in the first place. 
 The president set the country on course for the cliff in 2011, when he rejected the congressional “supercommittee” proposal to cut federal spending. The president insisted on the “trigger” cuts that, left unaltered, will slash $500 billion from the <a href="/topics//The_Pentagon">Pentagon</a> willy-nilly. The president has since rejected every deal <a href="/topics//U.S._Republican_Party">Republicans</a> have offered, including plans to raise federal revenues. 
 <a href="/topics//U.S._Republican_Party">Republicans</a> even made concessions on tax deductions — something <a href="/topics//Mitt_Romney">Mitt Romney</a> discussed in the presidential election campaign. All of a sudden, big benefits like the mortgage interest deduction are on the table. 
 None of that was enough for the president. He is just as ideologically wed to the idea of a tax rate hike as conservatives are unalterably opposed. 
 Funny thing, though: 18 months ago, <a href="/topics//Barack_Obama">Obama</a> suggested he would accept what the <a href="/topics//U.S._Republican_Party">Republicans</a> are now offering. “And what I’ve also said to Republicans is, if you don’t like (raising tax rates), then I’m happy to work with you on tax reform that could potentially lower everybody’s rates and broaden the base,” the president said in July 2011. 
 Clearly, he was joking. 
 So what’s likely to happen if the country goes over the “cliff”? <a href="/topics//U.S._Congress">Congress</a> will make retroactive fixes. Republicans won’t have to vote for a tax hike. Instead, they will vote to restore most of the tax breaks for Americans earning less than $250,000 a year. Probably some deductions will disappear. 
 Everyone will get a little of what they want, without addressing the real problem: a looming, $100 trillion wall of debt and unfunded entitlements. 
 That’s the cliff we’ll leave for our children to dive. 
 Ben Boychuk is associate editor of City Journal.

Boychuck: Washington won't solve the real 'fiscal cliff'

Boychuk: Washington won't solve the real 'fiscal cliff'

Raul <a href="/topics//Fidel_Castro">Castro</a> is right. 
 The powerful brother of dictator <a href="/topics//Fidel_Castro">Fidel Castro</a> is almost always wrong. But he was perfectly right when he told comrades in Camaguey, Cuba: "No country has the luxury of spending more than it has." 
 Even now, as America slouches toward the fiscal cliff, House Speaker <a href="/topics//John_Boehner">John Boehner</a>, R-<a href="/topics//Ohio">Ohio</a>, and leading <a href="/topics//U.S._Republican_Party">Republicans</a> seem ho-hum about limiting federal expenditures and restraining a government gone crazy. <a href="/topics//Barack_Obama">President Barack Obama</a> and top <a href="/topics//U.S._Democratic_Party">Democrats</a> are downright allergic to these concepts. Too bad this Cuban tyrant's rare words of wisdom escape Washington's spendaholics. 
 There are billions of ways to shrink the $3.8 trillion federal budget. Let's start with these: First, the <a href="/topics//Connie_Mack">Mack</a> Penny Plan, created by outgoing Congressman <a href="/topics//Connie_Mack">Connie Mack</a>, R-Fla., would cut a penny from each dollar that Uncle Sam spends each year, for eight years. In 2013, <a href="/topics//U.S._Congress">Congress</a> would spend 99 cents per dollar disbursed <a href="/topics//Today_(NBC_Program)">today</a>; in 2014, 98 cents, etc. Rather than consume 24.3 percent of Gross Domestic Product <a href="/topics//Today_(NBC_Program)">today</a>, federal spending in 2020 would be capped at 18 percent, just below the 18.2 percent at which <a href="/topics//Bill_Clinton">Bill Clinton</a> left it. 
 Such steady reductions, spanning nearly a decade, finally would lasso the spending monster. Washington policymakers should be able to prioritize and reallocate funding within a predictable, slowly decreasing budget. 
 Second, Washington should terminate antiquated and extraneous programs. 
 -- FDR launched the Rural Electrification Administration in 1935 to bring power to Appalachia. It morphed into the Rural Utilities Service and now spends taxpayer dollars to bring wind turbines and broadband Internet to the countryside, including an $81.6 million gift to VTel Wireless. Now that Appalachia has been electrified since at least 1960, let's declare, "Mission accomplished," thank the staff, retire them, and sell their offices. 
 -- Beside food-safety inspections, the <a href="/topics//United_States_Department_of_Agriculture">Agriculture Department</a> creates little value. Americans can thrive without agrocrats dictating sugar prices and paying farmers some $1.8 billion annually not to farm. Food growers and eaters can manage without Washington's relentless interference. 
 -- Washington expands affordable housing, so millions of Americans can buy homes, and simultaneously supports housing prices, so millions of Americans can enjoy precious nest eggs. Which is it? Washington should close the Department of Housing and Urban Development and exit the housing sector, which it nearly demolished in 2008. 
 -- Launched in 1970, the <a href="/topics//PBS">Public Broadcasting Service</a> challenged the three original broadcast networks, back when many TVs received just 13 channels. <a href="/topics//Today_(NBC_Program)">Today</a>, anyone unhappy with <a href="/topics//ABC">ABC</a>, <a href="/topics//CBS">CBS</a>, or NBC can watch <a href="/topics//C-SPAN">C-Span</a>, the <a href="/topics//History_Channel">History Channel</a>, <a href="/topics//National_Geographic">National Geographic</a>, <a href="/topics//Turner_Classic_Movies">Turner Classic Movies</a>, and literally hundreds of other culturally enriching offerings. Thousands of DVD titles offer tremendous educational and artistic value. And don't forget books. <a href="/topics//PBS">PBS</a> and <a href="/topics//Jim_Lehrer">Jim Lehrer</a> will survive once they fully depart the federal dole and let donations and other nongovernment money finance 100 percent of their budget, rather than a mere 85 percent today. 
 Third, between December 2008 and December 2011, Washington-based executive-branch civilian employees grew from 345,326 to 368,706. This 6.8 percent expansion across <a href="/topics//Barack_Obama">Obama</a>'s first three years is ripe for reduction, especially considering the size of these feds' paychecks. According to Bureau of Economic Analysis data analyzed by the libertarian Cato Institute's Chris Edwards, federal civilian employees in 2011 averaged $128,226 in total compensation ($84,671 in wages and $43,555 in benefits). 
 Private-sector workers, meanwhile, earned half of that: $64,560 ($53,463 in wages and $11,099 in benefits). Even worse, 825 directors at <a href="/topics//Fannie_Mae">Fannie Mae</a> and <a href="/topics//Freddie_Mac">Freddie Mac</a> last year got paid at least $205,330. 
 "The federal workforce has become an elite island of secure and high-paid workers, separated from the ocean of average American workers competing in the global economy," Edwards commented. "Federal wages should be frozen or cut, overly generous federal benefits should be overhauled, and the federal workforce downsized through program terminations and privatization." 
 If Washington will not stop hiking spending, spending hikes will stop Washington. How sad that nearly every <a href="/topics//U.S._Democratic_Party">Democrat</a> and too many <a href="/topics//U.S._Republican_Party">Republicans</a> cannot grasp a concept self-evident even to a Cuban Communist. 
 Deroy Murdock is a columnist with Scripps Howard News Service and a media fellow with the <a href="/topics//Hoover_Institution">Hoover Institution</a> on War, Revolution and Peace at Stanford University.

OPMURDOCK20

Murdock: Will Washington ever cut spending?

Fiscal Cliff cropped

In negotiations over the so-called fiscal cliff, <a href="/topics//Barack_Obama">President Barack Obama</a> is calling for $1.4 trillion in new tax revenue over the next decade. 
 The <a href="/topics//U.S._Republican_Party">Republican</a> opposition, led by House Speaker John <a href="/topics//John_Boehner">Boehner</a> of <a href="/topics//Ohio">Ohio</a>, has signaled that the <a href="/topics//U.S._Republican_Party">Republicans</a> could stomach generating as much as $800 billion in new revenue over the next decade, or half of Obama's number. 
 Such a large difference obscures a more fundamental agreement: Neither side is interested in addressing the central role federal spending plays in creating persistent deficits and, more important, damping economic growth. 
 The deficit for fiscal 2012, which ended on Sept. 30, came in at about $1.1 trillion, marking the fourth consecutive year that the nation has posted a trillion-dollar-plus spending gap. Contrary to what Dick Cheney said when he was vice president, deficits do matter. 
 Under the most recent budget plans of House <a href="/topics//U.S._Republican_Party">Republicans</a> and Obama, the federal government will spend from $40 trillion to $47 trillion over the next decade. Yet in the current negotiations, <a href="/topics//John_Boehner">Boehner</a> has called for only $800 billion in spending cuts and Obama $400 billion, most of which would be pushed off until 2022 or later - tantamount to saying they won't happen at all. Neither side's long-term spending plans envision a balanced budget in the next 10 years. 
 In a paper released this year, economists Carmen M. <a href="/topics//Carmen_M_Reinhart">Reinhart</a>, Vincent R. Reinhart and <a href="/topics//Kenneth_Rogoff">Kenneth Rogoff</a> said that periods of debt overhang - when accumulated gross debt exceeds 90 percent of a country's total economic activity for five or more consecutive years - reduce annual economic growth by more than one percentage point for decades. 
 Over 20 years, the authors write, there can be a "massive cumulative output loss" that reduces gains by 25 percent or more. The United States went over the 90 percent threshold after the 2008 financial crisis. At $16.3 trillion, our current gross federal debt represents more than 100 percent of 2012's total economic activity or gross domestic product. 
 Obama hasn't explained precisely how higher tax rates on a small fraction of the population will do much to improve the country's balance sheet. According to the Congressional Budget Office, increasing taxes on the wealthiest Americans to Clinton- era levels will raise $220 billion over four years - $55 billion a year on average through 2016, the last year of Obama's presidency. 
 Over that same period, the White House <a href="/topics//Office_of_Management_and_Budget">Office of Management and Budget</a> estimates federal spending at $15.8 trillion, or almost $4 trillion a year on average, and annual deficits of $700 billion. 
 A little history: 2000 was about the best year ever for federal revenue since 1950. The government raked in slightly more than $2 trillion in nominal dollars and $2.3 trillion in inflation-adjusted (fiscal year 2005) dollars. When measured as a percentage of GDP, revenue reached 20.6 percent, the highest fraction ever recorded in peacetime. Although it's true that receipts in 2006 and 2007 topped the $2.3 trillion mark in constant 2005 dollars, those totals represent smaller fractions of GDP, 18.2 percent and 18.5 percent, respectively. So it's fair to call the $2.3 trillion in constant dollars a high-water mark. All these figures are drawn from the 2013 Historical Tables generated by the OMB; see table 1.3. 
 The high level of revenue - both in constant dollars and as a percentage of GDP - was reached in a roaring economy. And all Americans were taxed at significantly higher levels than they are now. 
 Whatever you think about the decline of rates under President <a href="/topics//George_W._Bush">George W. Bush</a>, it made the U.S. tax system more progressive by reducing the burden on middle- and lower-income people. That's one reason that singling out high-income earners for increases this time will yield such little revenue: All of us paid higher taxes then. It wasn't just the swells at the top of the income pyramid. 
 Even if government could attain the revenue levels of seven years ago, it wouldn't come close to covering spending, which crossed the $3 trillion mark, in inflation-adjusted dollars, in 2009. Neither <a href="/topics//U.S._Republican_Party">Republicans</a> nor <a href="/topics//U.S._Democratic_Party">Democrats</a> are suggesting reducing total year-over-year spending. 
 The OMB estimates that annual government spending from 2013 to 2016 will average $3.25 trillion in 2005 dollars, or 22.7 percent of GDP. Whether measured in constant dollars or as a percentage of the economy, the government has never once reached that level of revenue, much less sustained it for a number of years. 
 Given low estimates for economic growth over the coming years, any attempt to reduce the debt-to-GDP ratio before Obama leaves office will thus require significant spending cuts in the near term. 
 Both the president and members of <a href="/topics//U.S._Congress">Congress</a> worry that rapid spending cuts would cause a new recession or slow down the recovery. Such fears are overstated. 
 In the 1990s, <a href="/topics//Canada">Canada</a>, for instance, reduced debt-to-GDP ratios through an aggressive combination of actual, year-over- year spending cuts and higher taxes. The result wasn't malaise but a burst in activity. 
 The same happened in the U.S. right after <a href="/topics//World_War_II">World War II</a>. In 1944 and 1945, annual government spending (in 2005 dollars) averaged about $1 trillion and represented more than 40 percent of GDP. By 1947, it had plummeted to $345 billion in 2005 dollars and 14 percent of GDP. Even facing the demobilization of millions of soldiers, the economy soared and <a href="/topics//Unemployment">unemployment</a> fell despite almost universal fears that the opposite would happen. 
 Such outcomes are not flukes. Research by economists Alberto F. Alesina and Silvia Ardagna underscored that fiscal adjustments achieved through spending cuts rather than tax increases are less likely to cause recessions, and, if they do, the slowdowns are mild and short-lived. 
 What's more, when spending reductions are accompanied by policies such as the liberalization of trade and labor markets, they are more likely to have a positive impact on growth. 
 While many economists - and certainly all politicians - worry that turning off the spigot of public spending will shrink an economy (and anger constituents receiving the cash), the opposite is likely to be true. 
 In an October 2012 study published in the National Bureau of Economic Research, Alesina and Ardagna point to <a href="/topics//Canada">Canada</a> (1993- 1997), Sweden (1993-1998) and Britain (1994-2000). In these cases, spending cuts had a positive effect on private investment while improving consumer and business confidence by reducing the expectation of higher taxes. 
 Obama said in September that he would cut $2.50 in spending for every new dollar of tax revenue - what he has called a "balanced approach." Yet his proposal for dealing with the fiscal cliff - $1.4 trillion in new tax revenue and $400 billion in spending cuts - represents a $3.50 increase in taxes for every $1 of cuts, assuming the reductions take place. 
 As the history of deficit-reduction frameworks (including those signed by <a href="/topics//U.S._Republican_Party">Republican</a> Presidents Ronald Reagan and <a href="/topics//George_H._W._Bush">George H.W. Bush</a>) has shown, when immediate rate increases were "balanced" by spending cuts down the road, the spending cuts are never made. 
 In any <a href="/topics//Case_Western_Reserve_University">case</a>, recent experience shows that even if Obama's 2.5-to-1 ratio of spending cuts to revenue increases came to pass by some miracle, it is far too timid. Economist <a href="/topics//David_Henderson">David Henderson</a> estimates that during the 1990s retrenchment in <a href="/topics//Canada">Canada</a>, the government cut spending by $6 to $7 for every new dollar of revenue it raised. 
 Obama and <a href="/topics//John_Boehner">Boehner</a> have been largely silent on the specifics of their cuts, though both seem bent on slicing off parts of old-age entitlements such as Medicare and Social Security long after they are out of office. 
 The best holiday gift the president and <a href="/topics//U.S._Congress">Congress</a> could give the country is to spend the final weeks of 2012 working on an honest plan to cut spending here and now. 
 Nick Gillespie is the editor in chief of Reason.com and the co-author of "The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America." Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

OPCLIFF18

Opinion: Barack Obama and John Boehner, both reckless spenders

boehner obama cropped

Almost everyone thinks we should broaden the tax base; that is, reduce the number and size of tax deductions, exclusions and credits. 
 The Bowles-Simpson fiscal-reform plan went after tax breaks so aggressively it was able to slash the deficit and still cut tax rates. Most conservative reformers follow that model. Even economists who aren't conservatives generally say the government should raise revenue by getting rid of tax breaks before it raises rates. That is the position <a href="/topics//U.S._Republican_Party">Republican</a> leaders in the House and <a href="/topics//U.S._Senate">Senate</a> have taken, too. 
 As pleasing as it is to find a consensus in this polarized era, this one is mistaken. It would be either undesirable or politically impossible to reduce the largest loopholes in the code. 
 At the top of the <a href="/topics//Congressional_Budget_Office">Congressional Budget Office</a>'s list of the biggest tax breaks is the exclusion of employer-provided health insurance from the income and payroll taxes. You pay taxes on your wages, but not on your benefits, encouraging employers to provide more of your compensation in the latter form. The policy is something of a historical accident: It arose after employers used benefits to evade <a href="/topics//World_War_II">World War II</a>-era wage controls. If we were designing a code from scratch, we would certainly tax these benefits. 
 We have had this break for an awfully long time, though. It would be disruptive, as well as unpopular, to get rid of it. The exclusion should be modified so that it doesn't reward people for choosing more expensive policies, and so that people who have no access to employer plans can buy insurance for themselves. What we won't do is get big savings from shrinking this tax break, and we shouldn't try. 
 Several other large breaks <a href="/topics//Benefit_(designer)">benefit</a> savings and investment, the most famous being the low tax rate on capital gains and dividend income, compared with labor income. In a way, though, these aren't tax breaks at all: They are a partial corrective to the code's bias against saving and investment. A better code would just tax consumption, which would mean a smaller tax base. 
 Economists generally dislike the mortgage-interest deduction, another big one. They argue that it has reduced national wealth without doing much to increase homeownership. With housing finally showing signs of a recovery, though, it seems like an inopportune time to fight against this deduction. Anyway, Realtors in every congressional district in the country, all of whom know a lot of people in their communities, would surely jam the phone lines on Capitol Hill if anyone tried it. It's not happening. 
 Like the tax breaks for saving, the tax credit for children can be justified as a partial corrective to other federal policies. By raising kids, most parents make a contribution to the future of Social Security and Medicare beyond what they pay in payroll taxes. Fully recognizing that double contribution would require expanding the credit, not shrinking it. 
 The deduction for charitable contributions is another sacrosanct tax break - and that's fine. How many people really think the tax code has wreaked damage on American society by encouraging more charitable giving than would otherwise take place? Rounding out the list of the top breaks is the deductibility of state and local taxes. It's hard to see the justification for making people in low-tax areas pay more to subsidize states that choose to have larger governments - especially when many of the high-tax states have higher incomes than the low-tax ones, and when the biggest beneficiaries of the break are high earners. 
 Even this break won't be curtailed easily, though. Politicians in high-tax jurisdictions tend to be strong supporters of this deduction, and you can't blame them: Their voters would get hit hard if this deduction were scaled back, and it might force changes to their budgets as those voters grew more sensitive to state and local taxes. The <a href="/topics//Ronald_Reagan">Reagan</a> administration tried to eliminate this deduction in the 1986 tax reform but failed because of opposition from high-tax areas. 
 The more closely you look at the tax code, the less promising the idea of broadening the base becomes. That may be why <a href="/topics//Mitt_Romney">Mitt Romney</a>'s campaign proposed imposing a cap on the total value of all deductions anyone can take (and why so many congressmen are now talking about the idea). It is more or less an admission that paring back the number and size of specific tax breaks is more political trouble than it is worth in revenue. 
 The Bowles-Simpson model of tax reform - broadening the base and lowering rates - is the wrong one. Some tax breaks should be scaled back, to be sure. But the idea that the federal government can painlessly raise a lot of money from a base- broadening tax reform is a myth. 
 Ramesh Ponnuru is a Bloomberg View columnist, a visiting fellow at the <a href="/topics//American_Enterprise_Institute">American Enterprise Institute</a> and a senior editor at National Review.

OPPONNURU18

Ponnuru: Almost everyone is lying to you about tax reform

If you want to know why the fiscal-cliff talks are having such a devilishly hard time reaching resolution, you need to look behind the issues - taxes, spending, stimulus, austerity - that are dominating this month's debate and start looking ahead to the next debate. 
 Specifically, gaze dolefully forward to February or March or maybe April when the total volume of nominal federal debt will reach the statutory cap on borrowing - the "<a href="/topics//US_National_Debt">debt ceiling</a>" - setting up a repeat of the legislative brinksmanship we saw in the summer of 2011. The <a href="/topics//US_National_Debt">debt ceiling</a> is key because conservatives believe it gives them crucial hidden leverage that they currently lack, and because <a href="/topics//U.S._Democratic_Party">Democrats</a> are determined not to settle for a short-term deal this month without resolving the <a href="/topics//US_National_Debt">debt ceiling</a> for a while. 
 The debt ceiling, recall, is a curious American institution that we share exclusively with Denmark. Back in the 19th century, <a href="/topics//U.S._Congress">Congress</a> specifically authorized each issuance of federal bonds. When <a href="/topics//World_War_I">World War I</a> came along, this became tedious, so <a href="/topics//U.S._Congress">Congress</a> simply appropriated the funds it thought would be required for the war and authorized the federal government to borrow a bunch more money as needed to spend what <a href="/topics//U.S._Congress">Congress</a> had directed it to spend, up to a certain cap - the debt ceiling. 
 Over the years, this evolved into a fun exercise in congressional hypocrisy and partisan grandstanding. Congress would pass laws setting the tax code, laws shaping entitlement spending, and annual appropriations for the military and civilian functions of government. When a gap arose, as it often did, the <a href="/topics//United_States_Department_of_the_Treasury">Treasury Department</a> would, obviously, borrow the money. But every so often the combination of economic growth and inflation would guarantee that the government would run up against the authorized borrowing cap. At this point opposition party members of Congress would take potshots at the president. Back in 2006 when <a href="/topics//George_W._Bush">George W. Bush</a> had to ask for an increase in the debt ceiling, then-Sen. Barack <a href="/topics//Barack_Obama">Obama</a> called it "a sign of leadership failure" and proclaimed "Americans deserve better." West <a href="/topics//Wing_(musician)">Wing</a> did a jokey segment about it. 
 But after the sweeping <a href="/topics//U.S._Republican_Party">GOP</a> wins in the 2010 midterms, this took a darker turn. 
 <a href="/topics//U.S._Republican_Party">Republicans</a> began making noises about using the debt ceiling as leverage to force spending cuts. The <a href="/topics//Barack_Obama">Obama</a> administration miscalculated that they could turn lemons into lemonade by forging a broad deficit-reduction deal involving spending cuts and more revenue, metaphorically "breaking" the <a href="/topics//U.S._Republican_Party">GOP</a> dogma on taxes. What we got instead was total <a href="/topics//U.S._Republican_Party">Republican</a> intransigence, a panic that crushed consumer confidence, and ultimately a kludgy deal that helped set the stage for today's fiscal cliff. 
 The White House, naturally, doesn't want to do it again. Once the debt ceiling has been weaponized as a tool for extracting real policy concessions, it creates a dangerous situation. Sooner or later one party or the other will set off the bomb, and actually send the United States into default. 
 To prevent this, the <a href="/topics//Barack_Obama">Obama</a> administration has embraced a plan once floated by Sen. Minority Leader <a href="/topics//Mitch_McConnell">Mitch McConnell</a>, R-Ky., that will replace actual debt-ceiling threats with symbolic grandstanding. The <a href="/topics//United_States_Department_of_the_Treasury">Treasury Department</a> will say it needs to borrow more, Congress can pass a resolution of disapproval if it disapproves, and then the president can veto the resolution. All the grandstanding, none of the white-knuckle panic. 
 What's not been adequately appreciated by the press is the extent to which the Obama administration is deadly serious that this arrangement or one like it must be in any fiscal cliff deal. That's not a bargaining posture. The administration's analysts believe that going over the fiscal cliff temporarily would be damaging to the economy, but that having a debt-ceiling fight hanging over the first quarter of 2013 would be equally damaging. If resolving the fiscal cliff doesn't also resolve the debt ceiling, then nothing is accomplished for the short-term economy and any long-term deal is meaningless since <a href="/topics//U.S._Republican_Party">Republicans</a> will issue new demands in February when they have leverage. 
 But for <a href="/topics//U.S._Republican_Party">Republicans</a>, a debt-ceiling showdown increasingly seems to be their favorite plan. The simple fact of the matter is that there's nothing they can do this month to prevent Obama from getting his way on income-tax rates for the rich. He insists higher rates must be part of any plan to avert the cliff, and the cliff itself includes the rate hikes. 
 Yet while conceding as much, McConnell recently told reporters that "we'll have another opportunity later, when the debt ceiling issue arrives" to address tax and spending concerns that the <a href="/topics//U.S._Republican_Party">GOP</a> likely can't win on in December. 
 What makes this so tricky to resolve is that Republicans, with some justice, see a debt-ceiling concession as a major one on their part. Holding it in their back pocket gives them a lot of leverage, leverage they don't want to give up for free. But <a href="/topics//U.S._Democratic_Party">Democrats</a>, with some justice, see a debt-ceiling resolution as an apolitical good government measure separate from ideological disagreement over the size and scope of government. The 2011 hostage-taking was unprecedented, and if it becomes routine it won't systematically advantage either party - it'll just hurt the country. 
 And unlike on taxes, military spending, Medicare eligibility, or anything else it's hard to split the difference on the debt ceiling. The administration feels, as a matter of process and sound policy, that there's no point in a deal that doesn't defuse the debt ceiling. Republicans feel that the debt ceiling is the best bargaining chip they have. But to bargain for it would undermine the whole point of the administration's new stance, namely that the debt ceiling is too dangerous to be used as a negotiating ploy. 
 Long story short, don't expect this key sticking point to be resolved in the next three weeks, even if something is worked out to delay the implementation of the cliff. And don't expect the parties to resolve their fundamental disagreement about American public policy either. Crisis politics will be with us for months to come, at least. 
 Yglesias (@mattyglesias) is Slate's business and economics correspondent.

OPYGLESIAS14

Yglesias: Debt-ceiling showdown will extend 'fiscal cliff' crisis

APTOPIX Obama Fiscal Cliff Cropped

<a href="/topics//Barack_Obama">President Barack Obama</a> and House Speaker <a href="/topics//John_Boehner">John Boehner</a> (R-<a href="/topics//Ohio">Ohio</a>) met once again last night to talk about the "fiscal cliff," but they still appear to be a world apart on taxes and spending -- and more intent on winning the message war than bridging the divide. 
Hopefully the public posturing is all for show and leverage. Behind closed doors they need to narrow their differences and earnestly work toward a deal to avoid the cliff of tax hikes for all and indiscriminate spending cuts slated for Jan. 1. The stakes are high: Economists say going over the edge would plunge the nation back into recession. Secrecy may make the difficult job of deal-making easier, since interest groups can't attack what they can't see. 
But <a href="/topics//Barack_Obama">Obama</a> and <a href="/topics//John_Boehner">Boehner</a> are playing it so close to the vest that it's impossible to know what tax changes they're seriously considering. That should make people in <a href="/topics//New_York_(state)">New York</a> nervous. 
Achieving the long-term goal of deficit reduction will require both real spending cuts and higher taxes. Any deal to avoid the cliff must be a step in that direction. But when it comes to taxes, how it's done is critically important. 
Slashing the value of the deduction for state and local taxes, for instance, would be devastating for high-tax states like <a href="/topics//New_York_(state)">New York</a>. Increasing income tax rates for the top filers -- along with taxing capital gains and dividends at the same rate as other income, while zeroing out the corporate income tax -- would be a better way to go.
People on Long Island and in the region pay state and local taxes that are among the highest in the nation. If Washington limits the deduction for those taxes paid to the state and Long Island's counties, towns, schools and special districts, the result would be a tax on a tax. That would make the burden even heavier, and not just for the most affluent.
<a href="/topics//John_Boehner">Boehner</a> has proposed raising $800 billion in revenue over 10 years by limiting deductions and loopholes. But the <a href="/topics//U.S._Republican_Party">GOP</a> point man has refused to say which ones. He needs to let the public in on what his party has in mind. Billions of dollars in tax breaks for profitable oil companies and agribusiness would be a good place to start. 
<a href="/topics//U.S._Republican_Party">Republican</a> presidential candidate <a href="/topics//Mitt_Romney">Mitt Romney</a> laid out an approach that would retain the most popular deductions, including for charitable donations, but limit their value. The idea is to dump them in one "bucket" and cap the amount a taxpayer can claim at say, $25,000 or $35,000. That would raise taxes for the top 2 percent: couples with incomes over $250,000 and individuals over $200,000. But depending on the maximum amount taxpayers could deduct, the tax bills for people making less could also go up, particularly those who pay high state and local taxes. 
Other big-ticket middle-class deductions for mortgage interest and employer-provided medical insurance should be phased out, in exchange for lower rates and a simpler tax code. But the state and local tax deduction should be off limits. 
Rep. <a href="/topics//Pete_King">Pete King</a>, Long Island's lone <a href="/topics//U.S._Republican_Party">Republican</a> representative, should do what he can to persuade his colleagues not to slash that deduction. It would hammer hard-pressed New Yorkers.

VPCLIFF14

Editorial: Save state and local tax deduction from 'fiscal cliff' deal

If you are distracted by the holidays and not paying attention to every twist and turn of the "fiscal cliff" drama, the guidelines we set up several weeks ago still apply. Until House <a href="/topics//U.S._Republican_Party">Republicans</a> say they support a tax rate hike, you can ignore the noise and go about your life. 
 However, if you happened to turn on <a href="/topics//C-SPAN">C-SPAN</a> on Tuesday, you might have seen Speaker <a href="/topics//John_Boehner">John Boehner</a> talking about the fiscal cliff and wonder what's going on. <a href="/topics//John_Boehner">Boehner</a> said that <a href="/topics//Barack_Obama">President Barack Obama</a> has not offered enough spending cuts in negotiations. 
 The only way <a href="/topics//John_Boehner">Boehner</a> is going to get House <a href="/topics//U.S._Republican_Party">Republicans</a> to sign on to a tax increase is if he can show his troops that the president has agreed to significant spending cuts. That sounds like stalemate. It is. It's also a sign of progress. 
 At this point you might want to go back to wrapping presents. Fiscal cliff talks have this frustrating circularity to them. That's why the <a href="/topics//Wall_Street_Journal">Wall Street Journal</a> can claim there is progress on the same day The <a href="/topics//Chicago_Tribune">Chicago Tribune</a> can say there is a stalemate. If you continue reading, we can't be responsible for putting you in a bad mood for your office party tonight. 
 You can claim progress or standstill at almost any moment. 
 We're at a standstill because <a href="/topics//John_Boehner">Boehner</a> won't agree to a rate increase or because the president won't agree to big enough spending cuts, but if the two sides are talking that's progress relative to not talking at all. 
 To some degree, it's always going to look like both progress and stalemate until there is either a deal Boehner has to sell to his members or until the whole thing finally breaks down and we go over the "cliff." The final fiscal cliff deal will almost certainly contain an increase in tax rates and spending cuts large enough-or of a kind-to irritate the president's supporters. White House advisers say that in the 2011 <a href="/topics//US_National_Debt">debt ceiling</a> negotiations, the administration named too may spending cuts on the theory that <a href="/topics//U.S._Republican_Party">Republicans</a> would then agree to tax revenue-but then the <a href="/topics//U.S._Republican_Party">GOP</a> cuts didn't follow. So they're going to let Republicans go first this time. 
 <a href="/topics//U.S._Republican_Party">GOP</a> sources familiar with the talks say the White House hasn't been as forthcoming as they were during the last set of negotiations-Medicaid changes are one example. So Republicans are legitimately frustrated. That might make you think the needle is pointed toward stalemate. 
 But if there is ever going to be a deal, it will only happen if Boehner looks like he has dragged the president somewhere <a href="/topics//Barack_Obama">Obama</a> doesn't want to go. Each time the speaker makes a public display, as he did Tuesday, it shows that he is fighting the good fight and holding the president's feet to the fire. Now, if there is a deal, he can say, "I beat on the president about cutting spending, and he gave in." 
 Members are going to look closely at the math above the theatrics, but if Boehner were unable to point to moments of peril and stalemate, his rank-and-file will just assume he got rolled. Therefore, this statement that seems to be about frustration - which would suggest we're farther than ever from a deal - can actually be seen as a necessary prerequisite for a deal. 
 The one trick for Boehner is that he can't appear to be too effective. He doesn't want to stir his members into such a fevered pitch that they don't accept any deal. Perhaps that's why Boehner described his meeting with the president this weekend as "nice" and "cordial." Everyone is still at the negotiating table fighting about taxes and spending, which means nothing has really changed in the underlying story. 
 By the end of the day, we learned that Boehner made his <a href="/topics//C-SPAN">C-SPAN</a>-televised remarks after receiving a White House offer (which he didn't mention on the House floor). The president had trimmed his proposal that $1.6 trillion be raised from taxes to $1.4 trillion. Boehner responded with his own counteroffer later in the day. 
 Negotiations have stalled - which means they are making progress. 
 Dickerson is Slate's chief political correspondent and author of "On Her Trail."

OPDICKERSON12

Dickerson: The zen of the 'fiscal cliff'

John Boehner Cropped

Maybe the tea party folks were right about the corrupting influences of Washington. Two years after the tea party radicals hit their high point with a wave of midterm House elections, <a href="/topics//U.S._Republican_Party">Republicans</a> are pointing fingers at one another and bickering so much that it is hard to tell them from <a href="/topics//U.S._Democratic_Party">Democrats</a>. 
 The big fight of the hour is over how best to deal with the self-made crisis known as the "fiscal cliff." Or is it, as some call it, a "fiscal bluff?" Both sides know what they need to do, but, since all of the options will bring pain, each side drags its heels in a very Washington-style way before they do it. 
 "Fiscal cliff" is popular shorthand for the term used to describe the end of the year. That's when President <a href="/topics//George_W._Bush">George W. Bush</a>'s tax cuts expire and the Budget Control Act of 2011 goes into effect, bringing a long list of automatic cuts to defense and social spending policies and programs as major provisions of <a href="/topics//Barack_Obama">President Barack Obama</a>'s health care program also go into effect. 
 Some experts like <a href="/topics//Federal_Reserve">Federal Reserve</a> Chairman <a href="/topics//Ben_Bernanke">Ben Bernanke</a>, who popularized the "fiscal cliff" term, fear a possible recession if we go over the cliff. <a href="/topics//Wall_Street">Wall Street</a> does get nervous about any sort of uncertainty. 
 But some other experts call it more of a slope, noting that the full negative impact wouldn't set in for days or weeks -- plenty of time for reason to set in, one hopes. Either way, some <a href="/topics//Wall_Street">Wall Street</a> investors already are covering their bets by hoarding cash to take advantage of possible bargains ahead. 
 Smart move. <a href="/topics//U.S._Congress">Congress</a> as a rule never makes a hard decision until it has a looming crisis to use as an excuse -- and this cliff gives a built-in negotiating advantage to <a href="/topics//Barack_Obama">President Obama</a>. 
 Just think: What happens if we go over the cliff? Among more than 1,000 expected automatic cuts, those that have gotten the most attention would end the Bush tax cuts and cut deep into defense spending. Both moves would upset <a href="/topics//U.S._Republican_Party">Republicans</a> more than they would trouble <a href="/topics//U.S._Democratic_Party">Democrats</a>. 
 These and other big bites to tax breaks and social services are more likely to be blamed on <a href="/topics//U.S._Republican_Party">Republicans</a> than on <a href="/topics//U.S._Democratic_Party">Democrats</a>, judging by recent polls. A similar public reaction favored President <a href="/topics//Bill_Clinton">Bill Clinton</a> in his standoff with House Speaker <a href="/topics//Newt_Gingrich">Newt Gingrich</a> through two back-to-back government shutdowns in the 1990s. 
 Current Speaker <a href="/topics//John_Boehner">John Boehner</a>, who was part of the <a href="/topics//Newt_Gingrich">Gingrich</a> team, shows no appetite for going over the brink again. Nor does President <a href="/topics//Barack_Obama">Obama</a> want to launch his second term with another recession. 
 But the biggest headache for both men is the hard-core <a href="/topics//U.S._Republican_Party">Republican</a> right <a href="/topics//Wing_(musician)">wing</a> who don't seem to realize, even after they lost seats in both houses and saw <a href="/topics//Barack_Obama">Obama</a> handily reelected, that their side is losing. <a href="/topics//John_Boehner">Boehner</a> seemed to send that signal when he purged four conservatives from their prime committee posts who had opposed his attempt to strike a budget deal with <a href="/topics//Barack_Obama">Obama</a> last year. 
 The Grand Old Party is divided between the pragmatic establishment lawmakers and the hardliners who appear to be suffering various stages of AODD -- Anti-<a href="/topics//Barack_Obama">Obama</a> Delusional Disorder. 
 The pragmatists can plainly see that Obama has the edge in this confrontation. They want to cut a quick deal on tax rates, conceding to Obama's demands for an end to the Bush tax cuts on upper income earners, so they can press for a bigger victory on entitlements. 
 The AODD crowd is standing their ground with muskets drawn and torches held high to resist any concession on tax rates, even as the clock ticks down to the cliff and an end to the Bush tax cuts on upper- and middle-income earners alike. 
 All of which reminds me of <a href="/topics//George_Santayana">George Santayana</a>'s definition of a "zealot" that former <a href="/topics//Wyoming">Wyoming</a> <a href="/topics//U.S._Republican_Party">Republican</a> Sen. Alan <a href="/topics//Alan_Simpson">Simpson</a>, of the bipartisan Simpson-Bowles fiscal responsibility commission, brings up when discussing tax fighter Grover Norquist: "One who redoubles his effort when he has forgotten his aim." I don't want to see our government go over the fiscal cliff, but that may be what it takes to show the tax-fighting zealots that most Americans aren't ready or eager to go over the brink with them. 
 <a href="/topics//Clarence_Page">Clarence Page</a> is a syndicated columnist for the Chicago Tribune.

OPPAGE11

Page: Who's afraid of the 'fiscal cliff?'

Since the re-election of <a href="/topics//Barack_Obama">President Barack Obama</a>, I've been fielding phone calls from friends and commentators around the world who are asking about the U.S. fiscal cliff. It turns out to be extraordinarily hard to explain. 
 The first problem is the notion of the cliff itself. It, of course, exists because the members of <a href="/topics//U.S._Congress">Congress</a> agreed that if they couldn't agree on policies and procedures to reduce the U.S. federal budget deficit and the long-term trajectory of U.S. <a href="/topics//US_National_Debt">national debt</a> by the end of this year, they would automatically allow a doomsday scenario to unfold. This scenario would allow President <a href="/topics//George_W._Bush">George W. Bush</a>'s tax cuts to automatically lapse and be replaced by the marginal tax rates that obtained under <a href="/topics//Bill_Clinton">Bill Clinton</a> while also automatically cutting about $600 billion of defense and other discretionary spending. It has been anticipated that the impact of this would be to a shift in U.S. GDP growth in 2013 from about plus 2.5 percent to about minus 2.5 percent growth. In other words, a rather nasty <a href="/topics//Economic_Recession">recession</a>. 
 The first question from Japan was how <a href="/topics//U.S._Congress">Congress</a> could agree on something as draconian as this as an automatic solution but could not come to a discretionary agreement on milder and more balanced measures. In other words, why would <a href="/topics//U.S._Congress">Congress</a> decide to allow the house to burn down automatically at the turn of the year but not decide to remove the matches and gasoline before then? Are congresspersons mostly pyromaniacs? Isn't it their job to work out compromise budgets precisely so that the house won't burn down? Why would they deliberately choose a doomsday automatic scenario knowing there was a greater than minuscule chance that it would actually be triggered? I tried to explain that ideologues would rather be dead and right than wrong and alive, but I'm not sure my Japanese friend understood. 
 Another question came from <a href="/topics//Australia">Australia</a>. "How much are we talking about," my friend asked? " I mean, is it anything that couldn't be covered by an increase of a few percentage points on high income earners?" 
 I explained that <a href="/topics//Barack_Obama">President Obama</a>'s idea is to increase taxes by 3 to 4 percentage points on the top 2 percent of income earners but that this proposal was being stubbornly and energetically resisted by the <a href="/topics//U.S._Republican_Party">Republican Party</a> leaders in Congress. 
 "What is the top tax rate right now," my friend asked. When I told him it was about 43 percent including state taxes and Social Security, he was flabbergasted. "But we already pay much more than that in <a href="/topics//Australia">Australia</a>," he said, and added that <a href="/topics//Australia">Australia</a>'s top tax rate of 46.5 percent is about the same as most other leading countries while the U.S. rate is among the lowest, being fourth from the bottom out of 34 countries. 
 "Why," she asked, "is it so hard to ask rich Americans to pay what other rich people pay in other advanced countries?" 
 Another good question. I offered the explanation that many U.S. leaders are convinced that raising taxes would reduce growth and act as a drag on job creation. But my friend pointed out that Australia is booming and creating many more jobs than America despite having much higher tax rates. 
 She continued that Germany also has much higher tax rates and is also running the world's largest trade surplus. She suggested that America should consider the possibility that its lagging growth rate and trade deficit might stem from paying too little in taxes rather than too much. Recent economic research, she emphasized, has shown that rising income inequality like that in the United States can itself be a drag on growth. 
 Next was an old colleague in France who asked about the expenditure side of things. Could things like defense, Social Security, and health care spending be substantially slashed? I explained that total annual U.S. defense spending is over $1 trillion when the costs of the <a href="/topics//Central_Intelligence_Agency">CIA</a>, <a href="/topics//US_State_Department">State Department</a>, veterans health care, and other defense related activities are all included. My friend pointed out that this sum is more than equal to the defense expenditures of the rest of the world combined. "You could cut that in half and still be spending about the same as the next 15 countries," he said. 
 Then he turned to health care. He noted that at 16 percent to 17 percent of GDP, U.S. spending on health care is about double that of France and most other developed countries such as Japan, Germany, <a href="/topics//United_Kingdom">Britain</a>, and <a href="/topics//Canada">Canada</a>. These countries all have universal coverage for their citizens and these citizens all have significantly longer life spans than U.S. citizens and fewer infant mortalities. Why couldn't America just copy and imitate some of these national policies and plans for health care delivery? What could I say? He's right on both counts. 
 I don't think I made any of my overseas friends understand the cliff, but I did come to realize that from abroad it makes America look feckless and incapable of dealing with its own problems let alone providing hegemonic leadership for the world. 
 Clyde Prestowitz is the founder and president of the Economic Strategy Institute (ESI).

OPPRESTOWITZ10

Prestowitz: Explaining the 'fiscal cliff' to non-Americans

Millions of women and children live on the edge of a fiscal cliff every day. More than one in seven women live in poverty and over half of all poor children live in families headed by women. For them, these statistics aren't just numbers on a page. Parents are forced to choose between rent and utilities, food and medicine. 
 Meanwhile, <a href="/topics//U.S._Congress">Congress</a> is about to choose between protecting programs for these struggling families or extending tax cuts for millionaires. For anyone who cares about Americans living on the edge, that choice should be easy. 
 And yet, there's a stalemate in Washington over what to do about the "fiscal cliff." 
 Some policymakers insist that protecting low tax rates for the very wealthy is necessary to create jobs, even though we had much stronger job growth after President <a href="/topics//Bill_Clinton">Bill Clinton</a> raised tax rates on the wealthy than after President <a href="/topics//George_W._Bush">George W. Bush</a> cut them. But they are targeting the very social safety-net programs that are vital to the economic security of women and their families. The truth is that sound fiscal policies are those that create good jobs for both women and men, protect programs that support vulnerable people, strengthen the middle class, and restore fairness to our tax system. 
 Here's how to propel our economy forward: 
 &nbsp; 
 Step 1: Invest in creating more good jobs. When more workers find jobs, their families are more secure. They have more money to spend, increasing consumer demand and promoting business growth. They need less assistance from public programs and pay more taxes. In short, promoting job growth helps families -- and shrinks the deficit over the longer term. 
 But instead of increasing investments in education, infrastructure, and other areas that strengthen the economy and create jobs, we've reduced key public investments, slowing the recovery. And women have paid a particularly high price. They are the majority of public sector workers -- teachers, health care workers, social service providers. Since the start of the recovery in June 2009, women have lost three jobs in the public sector for every 10 jobs they gained in the private sector. 
 A new report by my organization, the National Women's Law Center, shows that Medicaid supports more than 3.7 million jobs -- nearly 3 million of which are held by women. In <a href="/topics//New_York_(state)">New York</a> State alone, women hold close to 400,000 Medicaid-supported jobs. Cuts to Medicaid threaten these jobs, as well as health care coverage for millions of women and children. 
 &nbsp; 
 Step 2: Protect programs that support vulnerable women and families and strengthen the middle class. Lower pay and greater responsibilities for unpaid caregiving put women at greater risk of poverty and economic insecurity than men at every stage of their lives. As a result, women are more reliant on public programs to protect their own and their children's health, obtain quality child care, access <a href="/topics//Higher_Education">higher education</a>, and meet their basic needs. 
 In the current fiscal debate, every program women depend on is on the chopping block: far-reaching cuts to Medicare, Medicaid, and Social Security, and across-the-board cuts to child care, Head Start, education, family planning, services for frail elders, domestic violence prevention -- and much more. 
 One proposal to cut spending reduces the annual cost-of-living adjustment for Social Security benefits by switching to a new, lower measure of inflation known as the "chained consumer price index." The cut in the value of benefits is small at the beginning, so at first glance it appears benign. 
 But that cut deepens every year. It means that a typical single elderly woman would see a reduction in her Social Security <a href="/topics//Benefit_(designer)">benefit</a> equivalent to the loss of one week's worth of food each month at age 80, and nearly two weeks' worth at age 95. Women, who generally live longer and already depend on Social Security benefits for most -- often all -- of their income, stand to lose the most. 
 Or take child care assistance. It helps low-income parents enter and stay in the workforce and provides their children early learning experiences that prepare them for school. We're already moving backward: In 2012, families in 27 states were worse off under one or more child care assistance policies than in 2011. The across-the-board spending cuts scheduled to start in January would mean 80,000 children would lose child care assistance and 100,000 would be shut out of Head Start. 
 Protecting and strengthening programs like these is a winning proposition. They support women and families when they need help the most, and they mean jobs for the workers -- mostly women -- who provide these vital services. And all of these families, in turn, help keep local businesses afloat. 
 &nbsp; 
 Step 3: Extend tax cuts for those who need them, and let them expire for those who don't. We've already cut spending on federal programs by $1.5 trillion in the name of deficit reduction, while millionaires haven't contributed a penny in additional taxes. If we let the Bush-era tax cuts expire for the top 2 percent, all Americans would get a tax cut on their first $250,000 ($200,000 for an individual). Couples earning $300,000 would see little change in their taxes; 98 percent of Americans would see no change. And the nation would save $1 trillion over the next 10 years. 
 A trillion dollars is hard to imagine, so consider this: Extending all the Bush-era tax cuts would give the average millionaire a tax cut of $160,000 next year. That's enough to support child care assistance for 27 children, or Pell Grants to help 41 students attend college, or family planning services for 608 people. 
 Extending tax cuts that <a href="/topics//Benefit_(designer)">benefit</a> the middle class, including the 2009 improvements to the Child Tax Credit and the Earned Income Tax Credit, would effectively stimulate the economy. But the House has proposed ending these 2009 tax credit improvements, which were enacted to help low-income working families make ends meet. Ending them would take $12.6 billion out of the pockets of hardworking families next year. Women would bear two-thirds of this loss, since a large majority of low-income families are headed by women. 
 These three steps will improve the balance sheet both for families and the nation by strengthening the economy and restoring fairness to the tax code. The alternatives will weaken the economy and make life harder for those who are struggling, especially women. The choice is clear. 
 Joan Entmacher is vice president for family economic security at the National Women's Law Center, a nonprofit policy organization based in Washington.

OPENT09

Entmacher: Don't push women and families over the 'fiscal cliff'

women cliff illo

Sometimes, only satire can capture the absurdity of the moment. A recent headline from <a href="/topics//The_Onion">The Onion</a> read: "Congressman Torn Between Meaningless Pledge to Anti-Tax Zealot, Well-Being of Nation." It's funny - and also frightening - because it underscores a basic truth about our politics. 
 <a href="/topics//Grover_Norquist">Grover Norquist</a>, an unelected right-<a href="/topics//Wing_(musician)">wing</a> lobbyist accountable to no one except his wealthy funders, has had the <a href="/topics//U.S._Republican_Party">Republican Party</a> in his hip pocket for several decades. All but a handful of congressional <a href="/topics//U.S._Republican_Party">Republicans</a> have signed his pledge never, ever to raise taxes. Perhaps no other individual is more responsible for the intransigence and irresponsibility of the modern GOP. 
 Remember the <a href="/topics//U.S._Republican_Party">Republican</a> presidential debate when all the candidates raised their hands to say they would not accept even a budget deal that included 10 dollars in spending cuts for every dollar of tax increases? It was Norquist's power that they feared at that moment. 
 With the "fiscal cliff" deadline looming, it is time finally for the <a href="/topics//U.S._Republican_Party">Republicans</a> to exercise true statesmanship by defying Norquist and asking the most privileged among us to assume a little more sacrifice. 
 Allowing the upper-bracket Bush tax breaks to expire simply restores the tax rates of the Clinton years, a time of unprecedented, widely-shared prosperity. By contrast, the supply-side/trickle-down philosophy has failed at everything except making the wealthy wealthier. 
 The money to close the deficit will come from somewhere. If it doesn't come from upper-income Americans, then it will be taken from middle-class working families who have already taken a punch to the gut during this economic downturn. It will come from poor families who need a hand-up to get back on their feet. It will be taken from seniors who have worked a lifetime and earned a dignified retirement. 
 But the bottom line is this: any cuts to Social Security, Medicare or Medicaid benefits are unacceptable. As a matter of fundamental fairness and moral decency, our fiscal policy cannot be based on coddling those who have the most and squeezing those who have the least. 
 In fact, Social Security is not paid for out of the general fund and therefore has no impact on the federal deficit. 
 The Norquist vision, as he has famously said, is a government so small "we can drown it in the bathtub." He apparently believes that people who need government support ought to be washed down the drain. But what we need is a government that helps Americans stay confidently afloat, even through tough storms and choppy waters. 
 That's what Americans voted for last month. They emphatically rejected <a href="/topics//Mitt_Romney">Mitt Romney</a>'s view that 47 percent of our people are undeserving freeloaders with no sense of personal responsibility. They voted for more progressive taxation; they voted for a fair shake for everyone; they voted for a level playing field and a government that is on their side. 
 Grover Norquist speaks for a minority faction and a narrow special interest, not for the American people. 
 A <a href="/topics//Washington_Post_Company">Washington Post</a>-ABC News poll from a few weeks ago showed 60 percent of Americans supporting an increase in taxes for every dollar earned beyond $250,000 a year as a way of addressing the so-called fiscal cliff. The good news is there are signs Norquist's grip is loosening. Several <a href="/topics//U.S._Republican_Party">Republican</a> lawmakers have indicated a willingness to violate the "pledge" in order to solve the deficit problem, though most still want to cut middle-class programs as well. 
 Norquist has responded with bizarre personal outbursts, equating the pledge with marital vows and saying of one Republican member: "I hope his wife understands that commitments last a little more than two years or something." It's time for Republicans to break free from Norquist's clutches. For the good of the country and also the <a href="/topics//U.S._Republican_Party">Republican Party</a>, it's time to toss Grover Norquist's no-tax pledge over the cliff. 
 Rep. <a href="/topics//Lynn_Woolsey">Lynn Woolsey</a>, D-Calif., serves as national president of <a href="/topics//Americans_for_Democratic_Action">Americans for Democratic Action</a>.

OPWOOSELY06

Woolsey: GOP must disavow Norquist's dictatorial 'no-tax' pledge

Grover Norquist Cropped

<a href="/topics//Grover_Norquist">Grover Norquist</a> has become one of Washington's favorite whipping boys, but taxpayers owe him thanks for focusing needed attention on the real problem in Washington: excessive spending, rather than too-little taxing. 
 Norquist's "No Tax Pledge" does exactly that. 
 Excessive spending is the cause of Washington's unprecedented trillion-dollar budget deficits in recent years and spending is the best measure of the burden the federal government imposes on the economy. 
 Federal spending reallocates scarce resources from individuals and businesses to the public sector. And federal spending, by draining these resources from the private economy, where they would be put to their highest productive use, is at least partly responsible for the "Great <a href="/topics//Economic_Recession">Recession</a>" and anemic recovery. 
 How government finances it's spending - through current <a href="/topics//Income_Taxes">taxes</a> or by borrowing - is of second-order importance. What is important is the huge size and cost of the federal government. 
 The predictable political solution to this problem is to raise <a href="/topics//Income_Taxes">taxes</a>, especially on the "rich," who supposedly are not now paying their "fair share" of the cost of government. This, according to the conventional wisdom, will increase revenues and bring the budget closer to balance. 
 Given that only about half of American households pay any federal income tax at all nowadays, the numbers simply do not work. 
 And even if they did, raising taxes on high-income earners will create incentives for them to sidestep the higher taxes by establishing charitable foundations, moving their money offshore, or adopting other tax-avoidance schemes. 
 There is considerable evidence, beginning with President <a href="/topics//John_F._Kennedy">John F. Kennedy</a>'s tax cuts, that lower marginal individual income tax rates at the upper end of the income scale produce more income tax revenue. 
 However, as both <a href="/topics//John_F._Kennedy">President Kennedy</a> and, later, President <a href="/topics//Ronald_Reagan">Ronald Reagan</a> learned to their chagrin, lower tax rates lead to larger budget deficits unless they are accompanied by spending restraint. 
 In theory, a balanced federal budget can be achieved in two ways. One way is to raise tax rates in the faint hope of generating more tax revenues, thereby erasing some of the red ink. The other way is to cut spending. 
 The first option obviously imposes an additional drag on private economic activity. Less disposable income is available to households to spend on goods and services and to private businesses to invest in expanding plant capacity and hiring more workers. 
 Since consumers and producers contribute to wealth creation and economic growth, raising taxes is a recipe for continued stagnation. 
 Moreover, higher tax revenues shift responsibility for economic growth from the private economy to the public sector, the latter of which has proven repeatedly that bureaucrats and politicians are incapable of "investing" the taxpayers' money wisely. 
 <a href="/topics//Solyndra">Solyndra</a>, the Chevy Volt and bailouts of too-big-to-fail financial institutions are cases in point. 
 Nobel laureate economist <a href="/topics//Milton_Friedman">Milton Friedman</a> once said that he preferred a small, unbalanced federal budget to a large, balanced one. His preference recognized that, while taxes and federal government borrowing impose significant burdens on the economy, their negative effects are swamped by the impacts of the spending programs they finance. 
 <a href="/topics//Grover_Norquist">Grover Norquist</a> is spot-on. No matter how public spending is financed, higher taxes just kick the can down the road. The disorder in the federal government's fiscal house can be set right only by getting rid of spending programs that America's taxpayers can't afford. There are plenty to go round. 
 Signing Norquist's "No Tax Pledge" doesn't mean opposing all changes in the federal tax code; it merely means looking to spending cuts, first, and then to reforming our Byzantine IRS tax apparatus for collecting them. 
 <a href="/topics//U.S._Republican_Party">Republicans</a>, especially, and all of us owe Norquist thanks, not condemnation. 
 William F. Shughart II is a senior fellow with the Independent Institute in Oakland, Calif., and the J. Fish Smith professor in public choice at <a href="/topics//Utah_State_University">Utah State University</a>.

OPSHURART06

Shughart: Grover Norquist may be mocked in D.C., but he's a hero to taxpayers

Grover Norquist CROPPED

If there is any validity to historic precedence, the <a href="/topics//U.S._Congress">Congress</a> and the White House ultimately will come to some sort of compromise over the impending doom of sequestration, but not before the Dec. 31 deadline is only moments away. 
 In the meantime, those who occupy opposite ends of <a href="/topics//Pennsylvania">Pennsylvania</a> Avenue here will have put the nation through a holiday season of strain rarely matched since <a href="/topics//Pearl_Harbor">Pearl Harbor</a>. This has prompted a variety of suggestions on how to break the stalemate over spending cuts, tax increases and all the other economic questions plaguing us. 
 One idea propounded recently would be to withhold the pay and benefits of all the parties involved until such time as they become reasonable. That includes the members of <a href="/topics//U.S._Congress">Congress</a> and everyone working in the White House, without exception. Perhaps the threat of a lump of coal in their <a href="/topics//Christmas">Christmas</a> stockings would do the trick, the theory goes. 
 A second idea, and the one I personally like, would be to transport all the same bozos (male and female) to the Grand Canyon and shove them off while shouting, "How's that for a fiscal cliff, morons?" I would suggest assigning the privilege of yelling to <a href="/topics//Alan_Simpson">Alan Simpson</a> and <a href="/topics//Erskine_Bowles">Erskine Bowles</a>, the co-chairs of the defunct commission to solve the <a href="/topics//US_National_Debt">national debt</a> problem, if it weren't for the fact they have grown hoarse warning us about this for two years. 
 A third proposal, made by someone who chooses to remain anonymous because he wasn't authorized to speak for a growing majority of us, is that we conduct a palace coup overthrowing the likes of <a href="/topics//Grover_Norquist">Grover Norquist</a>, the anti-tax obsessive who would be king, and reinstalling people who think for themselves to head of the <a href="/topics//U.S._Republican_Party">Republican Party</a>. Also, if we really wanted to do it up right, we could demand -- under penalty of expulsion -- that <a href="/topics//Barack_Obama">Barack Obama</a> learn the complete lyrics of the national anthem beyond "soak the rich." All this is enough to make one wonder where <a href="/topics//Lyndon_B._Johnson">Lyndon Johnson</a> is when we need him. The master craftsman, who dragged domestic policy out of the dark ages with a strategic skill unmatched in modern history, probably is somewhere screaming the refrain for which he was famous -- "come let us reason together" -- while firmly twisting his opponents' <a href="/topics//ARMS_(band)">arms</a> behind them. 
 Clearly, the current occupant of the Oval Office has decided for the time being that compromise is not a viable way to run a government. He's taken the position that his recent victory now affords him the opportunity to stick it to all those he couldn't in the first four years. His motto for the next quadrennial seems to be "no more Mr. Nice Guy," while holding true leadership to a minimum. 
 We now hear that <a href="/topics//U.S._Republican_Party">Republican</a> conservatives might be willing to extend the Bush-era tax cuts for everyone immediately and deal with the thornier issues earlier next year when they face another crisis about raising the debt limit. So does that mean they sanction the definition of insanity -- you know, repeating the same mistake over and over, hoping for a different result? Here's a fourth unsolicited suggestion. Everyone involved in this irresponsibility should be compelled en masse to see the new movie "Lincoln." It should give them a clue of what it takes to govern responsibly. My only quarrel with that proposal is that in saving the nation, the star of the show leaves us with the feeling that it was all worth it. Certainly, the actions of the current group we as voters foolishly elected, expecting rational behavior, have raised serious questions about that. 
 Those who follow apocalyptic religions may just be on the right track. There used to be a theory that the end of the world had been postponed indefinitely because of a shortage of trumpeters. That it seems has been dispelled at least as it pertains to the world as we Americans know it. The horn blowers on Capitol Hill are warming up and at 1600 <a href="/topics//Pennsylvania">Pennsylvania</a> Avenue the heralds already are on the front lawn playing one refrain: redistribute the wealth. 
 But relax! For 2 1/2 centuries, we have managed to meet the crises and survive. If history has any validity, we will muddle through on this one, too. 
 Dan K. Thomasson is the former editor of the Scripps Howard News Service.

OPTHOMAS06

Thomasson: How to back away from the 'fiscal cliff'

fiscal cliff

If I were to learn on Dec. 31 that my taxes are going up next year, I would do ... absolutely nothing. 
 Granted, I'm a salaried employee, not an entrepreneur or small-business owner. I don't have the option to adjust my hours and take more leisure when the after-tax return on work declines. 
 If my response, or nonresponse as it turns out, to changes in marginal tax rates is typical of the average worker, then all this talk about the negative impact of raising tax rates on the top 2 percent must be a bunch of malarkey, right? Not exactly. The effect on labor supply -- on our willingness to work -- is small. Most of us, especially the primary earner in a family, don't have the option to work less. 
 That doesn't mean we have no options. The effects of higher tax rates may not be apparent in the short run, according to Veronique de Rugy, a senior research fellow at the Mercatus Center at <a href="/topics//George_Mason_University">George Mason University</a> in Arlington, <a href="/topics//Virginia">Virginia</a>. But they manifest themselves over a lifetime: in our next job choice, in perhaps electing to join the underground economy and in deciding when to retire. 
 There is one group that can respond quickly and decisively to changes in top tax rates, according to economist Arthur <a href="/topics//Arthur_Laffer">Laffer</a>, chairman of Laffer Associates: the rich. 
 "The rich can change all sorts of things when it comes to their income," Laffer said. "A bricklayer can't." Rich Skedaddle For example, the rich can change where they earn their income by moving to a low- or no-tax state, which is what Laffer did when he left California for <a href="/topics//Tennessee">Tennessee</a>. They can change the timing of their income (defer it or shift it forward), the volume (quit work), and the composition. 
 OK, but if the government insists on fiddling with top tax rates even though historically it manages to snag a pretty constant share -- 18 percent -- of gross domestic product, what's it to me? It isn't that simple. "The tax impact of a tax-rate change is not exclusively on the person being taxed," Laffer said. "How much more the rich pay in taxes is minor. It's the secondary and tertiary effects that matter." What are those effects? Everything from what they spend to how they structure their investment portfolios to whether they invest in new enterprises to how many jobs they create. Remember, "the rich don't create jobs because it's good social policy," Laffer said. "They do it to make money for themselves." Wait a minute. Research by Nobel laureate <a href="/topics//Peter_Diamond">Peter Diamond</a> and Emmanuel Saez, an economist at the <a href="/topics//University_of_California">University of California</a> at Berkeley, finds that the revenue-maximizing top marginal tax rate is 73 percent. 
 In their econometric model, maybe. These guys need to get out in the real world. Two-thirds of the U.K.'s millionaires vanished -- either left the country or sheltered their income -- after the imposition of a 50 percent top-tax rate in 2010, according to the U.K. Telegraph. French Socialist President Francois Hollande announced a 75 percent income-tax rate on millionaries this year, along with other levies, only to hear the French respond, "C'est trop." Even on a theoretical level, <a href="/topics//Peter_Diamond">Diamond</a> and Saez focus on the short-run effect and ignore the long-run behavioral response, according to a critique of their work in the Nov. 19 Tax Notes, a publication of the nonprofit Tax Analysts. <a href="/topics//Nobel_Prize">Nobel Prize</a>-winning economist Edward Prescott, a senior monetary adviser to the <a href="/topics//Federal_Reserve_Bank_of_Minneapolis">Federal Reserve Bank of Minneapolis</a>, stresses the long-term effects as well. When he looked at the question of why Americans worked 50 percent more than Europeans, he was surprised to find that marginal tax rates, not cultural differences or <a href="/topics//Unemployment">unemployment</a> rates, explained virtually all of the difference. 
 Revenue Agreement You mentioned real-world effects. What do we have to show for the 2001 and 2003 tax cuts? The decade was mediocre in terms of economic and employment growth. 
 Bingo! That's probably the best argument for letting the tax cuts expire. The cut in marginal rates was minimal compared with earlier reductions from 70 percent to 50 percent to 28 percent. 
 If both parties agree that additional revenue must be part of any budget deal, why not allow the top rates to revert to the Clinton era's 39.6 percent and 36 percent? Don't confuse U.S. <a href="/topics//Barack_Obama">President Barack Obama</a>'s "tax fairness" with real revenue. "About three-quarters of the revenue loss from the Bush tax cuts came from everything below the top two brackets," said Michael Darda, chief economist at MKM Partners LLC in <a href="/topics//Stamford,_CT">Stamford</a>, <a href="/topics//Connecticut">Connecticut</a>. 
 You mean, from the cherished middle class? Yes, the very same middle class Obama says it's his mandate to protect. 
 The math doesn't work! Raising top tax rates will produce about $800 billion of revenue over the next 10 years, compared with a $3.7 trillion revenue loss from all the Bush tax cuts. 
 Shhh! The dirty little secret, which everyone seems to know but no one is willing to utter, is that middle-class taxes will have to go up. Not this year, or even next year, but eventually. There aren't enough rich folks to finance the promises the U.S. has made to the elderly. Both parties have chosen to maintain this fiction a while longer. 
 Which brings us back to our theme. If the supply of labor is slow to respond to tax-rate changes, and the rich are good at avoiding taxes, who gets hurt? I'm glad you asked. The wannabe rich. On this, Laffer is passionate (actually, he's passionate about everything). 
 "Higher marginal tax rates prevent poor people from becoming rich," he said. "The only way they can get rich is by earning income, which is taxable. Once you become rich, you have ways around it." Viewed in that context, a tax increase on the rich is really a tax increase on the poor and the middle class, the wannabe rich. Why, it gives new meaning to the term "trickle down." 
 Caroline Baum, author of "Just What I Said," is a Bloomberg View columnist.

OPBAUM06

Baum: Barack Obama's proposed tax hikes on rich will impact the middle class

Barack Obama Cropped

<a href="/topics//Grover_Norquist">Grover Norquist</a> looks and sounds like the leader of the <a href="/topics//U.S._Republican_Party">Republican Party</a>. 
 Norquist, the president of <a href="/topics//Americans_for_Tax_Reform">Americans for Tax Reform</a>, will go anywhere and eat anything for the opportunity to yammer against taxes. If you are serving breakfast, lunch or dinner -- or just coffee, tea or soda -- and have a TV studio, radio show or website, he will come to you. Can offer only a glass of water and a Twitter account? He may still come. (He had coffee today at Bloomberg's Washington bureau.) Norquist's influence stems in part from his accessibility. But the key to his power is that it has never really been challenged. We may soon find out what happens when it is. 
 Over the past 20 years or so, almost all <a href="/topics//U.S._Republican_Party">Republican</a> members of <a href="/topics//U.S._Congress">Congress</a> have signed Norquist's Taxpayer Protection Pledge. They have essentially promised -- crossed their hearts and hoped to die -- never, ever, ever to vote to raise taxes. 
 <a href="/topics//U.S._Republican_Party">Republicans</a> hardly need Norquist to discipline them; most would rather eat glass than raise taxes. But Norquist has melded that sentiment into a juggernaut as the keeper of a simple pledge, kept in a fireproof vault in his office, that has been signed by 279 members of the current <a href="/topics//U.S._Congress">Congress</a>, all but three of them <a href="/topics//U.S._Republican_Party">Republicans</a>. They defy it at their peril. 
 The promise, Norquist insists disingenuously, isn't to him. It's to the American people. Cross him -- strike that, cross the American people -- and you will face a primary challenge from the right. That challenge now has a name. It is "Tea Party II," Norquist said, and he predicts its ability to defeat those who go squishy on taxes and spending will dwarf that of "Tea Party I." 
 Making Love 
 No <a href="/topics//U.S._Republican_Party">Republican</a>, Norquist claims, has voted for increased taxes in 22 years -- so he hasn't had to make good on his threat to defeat them. Norquist prefers to make love, not war. Apostates are few and far between, and he speaks of them as lost sheep who have been temporarily led astray by the media. He has sympathy, he said over coffee, for someone trying to look "reasonable and thoughtful" whose remarks are taken out of context. 
 His sympathy persists even as a members of his flock wander off. Senator <a href="/topics//Lindsey_Graham">Lindsey Graham</a> of <a href="/topics//South_Carolina">South Carolina</a>, recognizing that <a href="/topics//Barack_Obama">President Barack Obama</a> isn't going to be rolled as easily in his second term as he was in his first, said he'll consider raising revenues. Senator <a href="/topics//Bob_Corker">Bob Corker</a> of <a href="/topics//Tennessee">Tennessee</a> agreed. Representative <a href="/topics//Peter_King">Peter King</a> of New York said the pledge is past its sell-by date. 
 Heretics, all of them. Norquist isn't used to being talked back to, but like the parent of a teenager whose control is waning, he knows to show some leniency, if only to save face. He calls breaches little "burps" or "impure thoughts." They didn't really mean it, he said, because their pre-conditions for new revenue -- for example, substantial entitlement reform -- won't be met. 
 Senator <a href="/topics//Saxby_Chambliss">Saxby Chambliss</a> of <a href="/topics//Georgia">Georgia</a>, for example, got a later curfew and keys to the family car even though he said, "I care more about my country than I do about a 20-year-old pledge." He and Norquist had a quiet phone call during which Norquist was reassured that the senator didn't mean to "imply they had major differences," and he should have been more clear and not "invoked my name," Norquist said. 
 Norquist doesn't admit it, but some members of Congress get TV-studio indulgences, allowing them to play above-the-<a href="/topics//The_Fray">fray</a> statesmen, praising the sentiment behind the pledge (and maybe even Norquist himself) while lamenting their inability to honor the specifics of it. Everyone wins: Both the author of the pledge and the men breaking it get more famous. 
 Dangerous Weapons 
 The strength of the pledge lies in not letting it be tested. Like a nuclear weapon, it is most frightening when not deployed. What would the pledge be worth if Chambliss or Graham, both up for election in 2014, broke it and went on to win? Norquist has been through all this before. During the debt- ceiling debate last spring, some Republicans blinked as Norquist stared them down. "We ended up with $2.5 trillion in spending cuts and not a cent in increased taxes," he said. 
 Norquist has already articulated a flexible standard for those who want to play with wolves but stay in the fold. As long as Republicans don't have their "fingerprints on the murder weapon" -- that is, as long as they aren't the architects of any plan for new taxes -- he will judge them to have kept their pledge. They would then be free to "run against the <a href="/topics//Barack_Obama">Obama</a> tax hike" without Norquistian interference in 2014. 
 That argues for a New Year's Eve scenario whereby the Bush tax cuts expire and are then restored -- fully for the middle class and partially for the wealthy -- moments after the champagne corks are popped. Republicans can say they delivered a tax cut to everyone, including the top 2 percent, and <a href="/topics//Barack_Obama">Obama</a> and the <a href="/topics//U.S._Democratic_Party">Democrats</a> can say they cut taxes for the middle class and raised them on the wealthy. 
 In other words, everyone gets what he needs. Especially Grover Norquist. 
 <a href="/topics//Margaret_Carlson">Margaret Carlson</a> is a Bloomberg View columnist.

OPCARLSON05

Carlson: Grover Norquist's dirty little secret

Anti-Tax Man

Although it isn't yet time to panic about the fiscal cliff, negotiations so far aren't exactly going well. The <a href="/topics//U.S._Republican_Party">Republicans</a> are committing themselves to an unsustainable principle of no marginal tax-rate increases whatsoever. And the <a href="/topics//U.S._Democratic_Party">Democrats</a> are failing to seize the moment to make progressive reforms to Medicare and Social Security. 
 There's still time to come to an agreement to prevent the more than $600 billion in federal spending cuts and tax increases scheduled to take effect in January while also raising the debt limit, but both sides will need to get out of the boxes they have put themselves in. 
 Let's start with the Republicans. Their adamant opposition to an increase in marginal tax rates for anyone, anywhere, has two problems. First, as I explained in last week's column, raising huge amounts of revenue by reducing tax expenditures gets harder to do as the details become clear. The only practical way to hit a reasonable revenue target is to have some increase in marginal rates. 
 The second problem is that hard-and-fast principles can look increasingly ridiculous when taken, by opponents, to their logical extremes. Imagine some clever but Machiavellian <a href="/topics//U.S._Democratic_Party">Democrat</a> (Senator <a href="/topics//Chuck_Schumer">Charles Schumer</a> of New York comes to mind) proposing that the top marginal tax rate be increased to 35.5 percent, from 35 percent, for people with income above $5 million. Would the Republicans really blow up a deal over an almost undetectable increase on a tiny number of extremely high-income taxpayers? That would be political suicide. On the other hand, if the Republicans accept this increase, then they don't have a principle anymore. 
 Waning Support 
 On this issue, Republicans are losing the support of even leading chief executives and K Street lobbyists. Randall <a href="/topics//Randall_Stephenson">Stephenson</a>, the CEO of <a href="/topics//AT&amp;T_Inc.">AT&amp;T Inc.</a>, for one, recently stated that a deal "will require a compromise involving an increase in both tax rates and revenue in return for real and significant steps to reform entitlements and rein in federal spending." Note that Stephenson's statement specifically mentions higher tax rates. 
 On the other hand, it also reminds us that the negotiations are about more than taxes. There is also the debt limit, which, according to the best guesses of both the <a href="/topics//Congressional_Budget_Office">Congressional Budget Office</a> and the <a href="/topics//Bipartisan_Policy_Center">Bipartisan Policy Center</a>, will be reached in the first quarter of 2013. 
 So the question for the Democrats is: Even if you win higher marginal tax rates, how do you plan to get the debt limit increased? The Republicans, after all, could cave on raising taxes but still be unwilling to include a debt-limit increase in the agreement, absent any changes to entitlements. In that case, the fiscal-cliff victory would be Pyrrhic, with another crisis arriving in February or March. 
 In any case, Democrats should affirmatively want entitlement reform that is progressive and puts the crucial programs on a sounder footing. 
 On Social Security, as I have previously argued, the Democrats, while they still control the White House and the <a href="/topics//U.S._Senate">Senate</a>, should want to lock in the victory they have already won over the idea of keeping private accounts out of Social Security. Plus, as <a href="/topics//Peter_Diamond">Peter Diamond</a> and I have laid out, it's possible to restore the program's long-term solvency while also making it fairer -- including by having it reflect the growing gap in life expectancy by income and education. Finally, and perhaps most important, Social Security reform can be phased in gradually, thereby minimizing the damage to the labor market from too much austerity too soon. 
 Difficult Reform 
 I'm not pretending that Social Security reform is easy. It must, though, be compared with the alternatives. Progressive Social Security reform not only would be affirmatively desirable but also could partially displace other, more troubling proposals -- which would take effect too quickly, and thereby raise the <a href="/topics//Unemployment">unemployment</a> rate, or be problematic on their own terms. It would be difficult, for instance, to make further cuts in discretionary spending, as it is already scheduled to reach unreasonably low levels as a share of the economy. 
 The administration claims that it is committed to reforming Social Security -- just not right now. But why would reform be easier in, say, 2014, when nothing is forcing action, than it is today? (And if the problem is that Republicans are reluctant to vote for additional revenue as part of Social Security reform, how exactly does that change over the next year or two?) To date, Barack <a href="/topics//Barack_Obama">Obama</a>'s administration has basically just repeated its previous budget proposals for Medicare, which are perfectly fine and desirable as far as they go. To go further, the <a href="/topics//Center_for_American_Progress">Center for American Progress</a> recently convened a group of health policy experts (including me), which put forward a dozen proposals to slow the growth of health costs over the coming decades. Although these changes don't generate significant "scoreable" savings because their effects are too uncertain for the <a href="/topics//Congressional_Budget_Office">Congressional Budget Office</a> to fully evaluate, they may well have a larger impact on our long-term fiscal future than anything else that could possibly be contained in the budget deal. 
 The optimistic view is that, so far, the two sides are just positioning. After all, if a deal were reached weeks ahead of the deadline, both sides would worry that they gave too much. But this week and next are when both Republicans and Democrats need to show more flexibility. 
 Peter Orszag is vice chairman of corporate and investment banking at <a href="/topics//Citigroup">Citigroup Inc.</a> and a former director of the <a href="/topics//Office_of_Management_and_Budget">Office of Management and Budget</a> in the <a href="/topics//Barack_Obama">Obama</a> administration.

OPORZSAG05

Orszag: A good deal will raise tax rates, fix entitlements

Congressional Leadership Cropped

Washington's Democratic and <a href="/topics//U.S._Republican_Party">Republican</a> leaders seem strangely lacking in fright as they are a mere three weeks away from plunging America off the much-feared Fiscal Cliff. 
 And we've finally figured out why. They figure they are merely heading toward a Fiscal Bungee Jump. 
 They are seem to believe that, yes, they'll take the plunge and plummet downward. But then -- boing! -- some sort of bungee lifeline will spring them upward again. And they will be able to land on their feet, right back where they started. So they can go on with their same old political fun-and-games, yammering about making the same deals they failed to make weeks ago, months ago, even years ago. 
 Here's what our leaders don't get: They act as though this Washington game-playing is all about them. It isn't. It's about us. Our jobs. It's our financial future they repeatedly jeopardized while playing their power games. 
 Make no mistake: They know how they stifled job creation, by creating a perpetual uncertainty that caused all smart executives to freeze hiring in big corporations and small businesses, and government agencies at all levels. 
 This year, as Washington pretended it was promoting job creation during Campaign 2012, it was really perpetuating an uncertainty that grew into epic (and almost panic) proportions. Executives in the private and public sector instituted hiring freezes, uncertain whether they'd have to staff up, cut back or even close down. 
 Good governance seemed a high-risk roll. So they stuck to name-calling and negative ads. 
 Then for four weeks following the election, they began what they called "negotiations" but really gave us more of the same-old game-playing. 
 Initially the <a href="/topics//White_House">White House</a> was smart. It detailed what <a href="/topics//Barack_Obama">President Barack Obama</a> always said he wanted most: Letting income tax rates rise to just over 39 percent, as scheduled, for those Americans making more than $250,000 a year; but extending the current lower rates for all making less than that. 
 Led by House Speaker <a href="/topics//John_Boehner">John Boehner</a>, <a href="/topics//U.S._Republican_Party">Republicans</a> initially argued to keep low tax rates for millionaires and declined to detail the cuts they wanted most. They said <a href="/topics//Barack_Obama">Obama</a> should first propose cuts he wanted <a href="/topics//U.S._Republican_Party">Republicans</a> to make, especially in entitlements such as Medicare, Medicaid and Social Security. 
 But the other day, after wasting weeks in political posturing, <a href="/topics//John_Boehner">Boehner</a> proposed the <a href="/topics//U.S._Republican_Party">GOP</a>'s first real compromise -- a plan that offers $2.2 trillion in savings, a bit more than <a href="/topics//Barack_Obama">Obama</a>'s plan. It includes $800 billion in new tax revenue, achieved by keeping low tax rates for the wealthiest, but shrinking their tax deductions. It also would slow the growth of benefits for programs including Medicare and Social Security, and reduce benefits in those programs that the wealthiest Americans receive but really don't need. 
 Put the plans on paper and you see a deal can be reached now before we get to the edge of the cliff -- with details to be ironed out next year. But when Washington's famous politicians get in front of a microphone, all that vanishes. 
 They start performing as if they are in a World Wrestling Federation tag-team match. One makes a move and the other howls and pounds the mat in feigned pain. Example: When <a href="/topics//Barack_Obama">Obama</a> laid out his first details, <a href="/topics//John_Boehner">Boehner</a>, who offered none, wailed that, "We're nowhere." But later he laid out his real details. And the <a href="/topics//White_House">White House</a> called <a href="/topics//John_Boehner">Boehner</a>'s plan "nothing new." We are waist deep in braunschweiger. 
 That's why you must jump into the ring. Right now! Not to perform like another scripted wrestler, but to lead our leaders. 
 Here's what we need you to do: Contact your senators and representatives -- not once but repeatedly. Demand that they quit their game-playing and attack politics comments. Demand they make public their bottom line spending cuts to keep us from plunging off the cliff. If your representative is a Tea Party <a href="/topics//U.S._Republican_Party">Republican</a> -- even if you are too -- you must now let them know their no-compromises posture is no longer acceptable. 
 All year, no pol had the guts to see whether it might be good politics to push publicly for <a href="/topics//Common_(musician)">common</a>-sense solutions, which required <a href="/topics//Common_(musician)">common</a> sense compromises to achieve a <a href="/topics//Common_(musician)">common</a> good. 
 Now patriotism demands that we rise to the occasion. Even when it means we must lower ourselves to the level of our leaders -- to get their attention and demand that they quit playing their games. 
 Martin Schram writes political analysis for Scripps Howard News Service.

OPSCHRAM04

Schram: Demand that your lawmakers stop playing games with 'fiscal cliff'

john boehner - cropped

Both the <a href="/topics//White_House">White House</a> and House <a href="/topics//U.S._Republican_Party">Republicans</a>, publicly at least, are digging in their heels deeper and deeper in the so-called negotiations over what we call, alternately, the fiscal cliff, the fiscal slope, the austerity bomb or the cable-talk-show topic of last resort. 
 Whatever logic either side pretends to have is irrelevant to the other side, because each is speaking a different political language and indeed a different economic language. 
 I agree with the <a href="/topics//White_House">White House</a> on the substance of the debate, and I think the administration's hand gets stronger over time. But as anyone who has been through negotiations will tell you, sometimes you just need a new idea to change the dynamic. 
 This one is not so new; it has been around for a long time, supported by a wide range of economists, including Nobel laureate <a href="/topics//James_Tobin">James Tobin</a>, as well as advocates, including <a href="/topics//Ralph_Nader">Ralph Nader</a> in The <a href="/topics//Washington_Post_Company">Washington Post</a> this weekend, and elected officials: a tax on financial transactions. It will give us gobs of revenue. It will fall on a sector that has generated enormous and unwarranted profits for a very few, who at the same time have benefited from huge bailouts and regulatory help and largely escaped any responsibility for their central role in creating the financial cataclysm that we are still struggling with. 
 Here is the idea: A tax of less than half a percent on every $100 of stock sales or sales of other financial instruments including bonds, derivatives and options. The tax could raise anywhere from $170 billion to $350 billion per year depending how it was applied. Extend that over 10 years, and we are raising almost what the <a href="/topics//White_House">White House</a> and <a href="/topics//U.S._Republican_Party">Republicans</a> agree needs to be raised to accomplish the objectives of a grand bargain. 
 But there is an added <a href="/topics//Benefit_(designer)">benefit</a> here: Trading in the equity and debt markets has gone wild over the past few years. High-speed trading and speculation have overtaken the economically legitimate reasons for our desire to have highly liquid markets: the capacity to raise capital and then allocate it efficiently among sectors and companies. 
 The trading that has emerged over the past few years is not serving that purpose - it is a casino enterprise driven by hidden pools and computer algorithms that do not seek to hold capital for longer than an instant. 
 To the extent that a financial-transfer tax drove some of those trading practices out of the marketplace, that would be another good outcome. 
 We are all used to paying a sales tax when we buy things - almost 9 percent here in New York City. 
 The application of this concept to the financial sector could solve our need for revenue, bring some sanity back into the financial sector, and give us a way to raise the revenue we need to run the government in a fiscally responsible way. Maybe this is the old idea that we need folks in Washington to pay attention to again. 
 Spitzer, former governor of New York, hosts "Viewpoint" on <a href="/topics//Current_TV">Current TV</a>.

OPSPITZER04

Spitzer: Tax stock traders to solve the budget crisis

BZSTOX03 CROPPED mg

Spoiler alert: The "fiscal cliff" will be resolved. 
 At the 11th hour, saner heads will prevail, a deal will be struck, and the <a href="/topics//U.S._Congress">U.S. Congress</a> will steer the economy away from its date with destruction. Congressional compromise will ensure that the scheduled tax increases and spending cuts are pared back and phased in only gradually. 
 The real danger, then, is not that we'll fall off the cliff. It's that <a href="/topics//U.S._Congress">Congress</a> will solve the problem badly, missing a once-in-a-generation opportunity to design a better tax system. 
 Current rhetoric suggests that <a href="/topics//U.S._Congress">Congress</a> will employ the same design principles that undergird our current shambolic tax system: populist politics, lobbying pressure, last-minute compromises and policy inertia. The result is likely to be a deal that tinkers at the edges and may even make the system worse. 
 Instead, imagine if simple economic insights were used to give us a better system. What would it look like? 
 One important insight is that there's no difference, economically speaking, between the government giving you an extra dollar or choosing to tax away one fewer dollar. Yet the budget process treats the two very differently. If the government wants to send you a regular check, it must first obtain the funds through an appropriations bill subject to annual scrutiny. 
 If the government wants to spend money by giving you a tax break, the expenditure need only be approved once. The result is a complex tax code riddled with ineffective tax preferences for a mind-boggling array of activities. 
 Better System 
 A better system would require <a href="/topics//U.S._Congress">Congress</a> to reauthorize each tax expenditure annually, a reform that would help eliminate wasteful loopholes and simplify the system. Just capping deductions at $25,000, as lawmakers are currently considering doing, isn't enough. 
 It's <a href="/topics//U.S._Congress">Congress</a> at its least courageous, refusing to ask the harder question of which tax breaks make sense. 
 Nearly all economists agree that the tax break for mortgage debt is a bad idea. It encourages people to take on more debt than they can afford and favors owners over renters. 
 By contrast, the tax break for charitable contributions makes sense. It subsidizes something of value to broader society, and there's evidence that it achieves its goal of stimulating giving. By simply capping deductions, Congress would reduce the incentive to give without eliminating the incentive to get too deep into debt. 
 Other tax breaks simply don't work very well. 
 Recent research, for example, suggests that we get very little bang for our buck by making retirement savings tax-deductible. Hence, we should consider revisiting the billions of dollars our government spends every year on retirement-savings incentives. 
 More generally, we should question the idea of using deductions rather than credits. 
 For example, the charitable-giving deduction is effectively a government matching grant: The government matches each contribution with an amount defined by the contributor's tax bracket. 
 As a result, a family wealthy enough to be in the 35 percent bracket gets a bigger grant than a middle-class family in the 15 percent bracket. It would be far simpler and fairer if the government just matched everyone's charitable contributions at a rate of, say, 20 cents per dollar. 
 A more equitable system would also do a better job of taxing families. 
 Currently, the number of earners in a family has no bearing on how it is taxed. Yet the two-earner family often has to pay for child care, meal preparation and laundry, while the single-earner family has someone with an extra eight hours in the day to help meet those needs. 
 Level Field 
 Failing to recognize the value of work done in the home is just one way the tax system implicitly subsidizes single-earner families, creating a disincentive for many to join the formal workforce. By shifting from levying taxes on households to levying them on individuals, the government could put different kinds of families on a more level playing field. 
 If we modernize our tax system, we shouldn't need to maintain the backup mechanism known as the alternative minimum tax. 
 Originally designed to make sure the highest earners pay some tax, the AMT has instead become a burden on middle-class families, negating much of the <a href="/topics//Benefit_(designer)">benefit</a> they would have received from the Bush tax cuts. Instead of applying a temporary fix every year to prevent the AMT from doing too much damage, Congress should abolish it. 
 Finally, economics tells us that the official ceiling on federal debt should be eliminated. By giving Congress a regular opportunity to default, the arbitrary limit raises the cost of financing the national debt. 
 Think about it: If you imposed a ceiling on how much of your credit-card balance you were willing to pay, would your bank continue to lend to you at the same rate, if at all? No wonder <a href="/topics//Standard_&amp;_Poor's">Standard &amp; Poor's</a> downgraded the government's credit rating after last year's debt-ceiling standoff. 
 We should raise the bar on our policy makers. Avoiding the fiscal cliff with yet another <a href="/topics//Rube_Goldberg">Rube Goldberg</a> fix isn't good enough. Taxpayers should insist on real reforms that respect the basic principles of economics and of <a href="/topics//Common_(musician)">common</a> sense. 
 Betsey Stevenson is an associate professor of public policy at the University of <a href="/topics//Michigan">Michigan</a>. Justin Wolfers is an associate professor of business and public policy at the <a href="/topics//University_of_Pennsylvania">University of Pennsylvania</a>, and a non-resident senior fellow of the <a href="/topics//Brookings_Institution">Brookings Institution</a>.

OPSTEVENS04

Opinion: Forget the 'fiscal cliff,' fix the U.S. tax system

When a potentially deadly cancer is diagnosed, and chemotherapy can help, sane people opt for chemotherapy. 
 It may cause hair loss and nausea. It's likely you'll feel terrible, and drop weight. If you live in the right state, or have the right connections, you will be able to smoke pot, which ameliorates some symptoms and makes daytime television more entertaining, but it's still going to be a rough experience. 
 But imagine that your doctor said: "Chemotherapy is nasty. Skip it and take morphine instead. It won't cure your cancer, but you'll feel better in the short term than if you undertook radical therapy. You'll be doing fine, till you drop dead." 
 Odds are you'd seek out a more responsible physician. 
 That's where we are with the federal budget, and the "fiscal cliff," except we don't have any national leaders in the role of "more responsible physician." 
 Why fear going over the fiscal cliff, when it's the solution, not the problem. The choice is between actions that make things a bit better now, and terrible down the line, or ones that make things a bit worse now, and great later. 
 The <a href="/topics//US_National_Debt">national debt</a> is $16 trillion. The deficit has been more than $1 trillion four years in row. The difference between what the government takes in and what it spends is a cancer. 
 But what our politicians are offering up as treatment are various flavors of morphine, because they don't think their citizen-patients can stomach the side effects of strong medicine. 
 On Jan. 1, barring a deal in <a href="/topics//U.S._Congress">Congress</a>, federal tax rates will go back up to <a href="/topics//Hillary_Rodham_Clinton">Clinton</a>-era levels for everyone. We'll also see some cuts in government spending, and the end of the 2 percent payroll tax holiday, which undermined Social Security while not stimulating the economy much at all. 
 And the annual deficit will drop from 7.3 percent of gross domestic product to a relatively manageable 4 percent. 
 The changes would tamp down the economy. According to the <a href="/topics//Congressional_Budget_Office">Congressional Budget Office</a>, growth, in the very short term, would decline. <a href="/topics//Unemployment">Unemployment</a> could go from 7.9 percent to 9.1 percent, costing two million jobs. That's serious, in the same way that the vomiting, hair loss and general illness that accompany aggressive cancer treatment are serious. But it's a short-term problem, caused by undertaking a long-term solution. 
 New York City Mayor <a href="/topics//Michael_Bloomberg">Michael Bloomberg</a>, made this point last year during a speech in <a href="/topics//Washington,_D.C.">Washington, D.C.</a>, when he said, "Allow the Bush tax cuts to expire at the end of 2012, not just for high-income earners, as the president has proposed, but for all tax brackets." 
 Letting the cuts expire for only the wealthy, as <a href="/topics//Barack_Obama">Obama</a> wants, only raises $700 billion over 10 years. Letting them expire for everyone, as no one but Mike and I want, raises $4 trillion. And increasing tax rates for no one, as <a href="/topics//U.S._Republican_Party">Republicans</a> want, does . . . nothing. 
 This can't be fixed via just spending cuts, because the real money is in Social Security, Medicare and defense. There is no possibility of really deep cuts in those programs. 
 If we leap off the fiscal cliff, the deficit becomes manageable. That will encourage growth and investment, and keep interest on the debt from swallowing all our taxes. 
 It's also fair. Letting rates rise only for families making more than $250,000 per year isn't. Every taxpayer has an obligation to pony up more to deal with a problem that threatens all of us. If the <a href="/topics//Hillary_Rodham_Clinton">Clinton</a> tax rates were unfairly nonprogressive, liberals wouldn't have passed them in the first place. 
 Letting these tax increases and spending cuts go into effect would cause real pain. 
 But we can't let the politicians sell us morphine when chemotherapy is the cure.

Columnists

Lane Filler

OPFIL30

Filler: The 'fiscal cliff' is the solution we need

The U.S. is holding a debate that is critical to its future: whether to tax, redistribute and consume income that would otherwise be invested. 
Warren Buffett has weighed in, supporting higher taxes on wealthy taxpayers. Unfortunately, the evidence he uses to make his case is superficial and flawed. One can't help but wonder: If he had stronger evidence, why wouldn't he use it? Buffett, the chairman of <a href="/topics//Berkshire_Hathaway">Berkshire Hathaway Inc.</a>, is an iconic leader. The U.S. needs insightful analysis from him. His claim that taxing upper-income taxpayers doesn't reduce investment runs counter to standard economic logic. 
<a href="/topics//Federal_Reserve">Federal Reserve</a> surveys show the top 5 percent of households save and invest 40 percent of their income. Median- income households save very little, whereas the Buffett household probably invests 99 percent of its income. 
If we tax, redistribute and consume income that otherwise would have been invested, the investable pool of savings declines. With a smaller pool of capital, less-attractive investment opportunities remain unfunded. Buffett tautologically claims investors will continue to invest in opportunities with expected returns above the cutoff point. Of course they will. Investment is lost at the margin. 
Buffett points to the 1950s and 1960s, when marginal tax rates were higher, and claims that because the economy grew faster then, it can grow faster today with higher marginal tax rates. 
Different Economies What he fails to mention is that the advent of interstate highways and television knitted together the U.S economy in the 1950s. Large capital-intensive companies such as <a href="/topics//General_Motors">General Motors</a> Co. and <a href="/topics//Procter_&amp;_Gamble_Company">Procter &amp; Gamble Co.</a> raced to exploit previously unrealized economies of scale. 
As a result, entrepreneurs and individual tax rates mattered much less to growth then than they do today. Growth accelerated independent of the tax rate. 
The U.S. sent its workforce to college long before the rest of the world. That also opened new investment opportunities. Two decades of underinvestment in the private sector -- first during <a href="/topics//The_Great_Depression">the Great Depression</a> and then during <a href="/topics//World_War_II">World War II</a> -- added further to the rebound. The cost of food dropped from more than 20 percent of gross domestic product to less than 10 percent, freeing resources to fuel the manufacturing boom. 
A much smaller portion of GDP was taxed, redistributed and consumed. Federal, state and local government spending was 28 percent of GDP then versus close to 40 percent today. The 1950s and 1960s don't provide evidence that increased government consumption, and the taxes needed to fund it, has no effect on growth. They show that investment matters. 
Buffett also claims the commercialization of the Internet in the early 1990s created a huge tailwind that benefited the rich, as if investors did little to earn this success. Similarly, proponents of higher taxes and spending often claim that faster growth in the 1990s demonstrated that higher taxes on investors don't hurt growth even though the commercialization of the Web would have accelerated growth independent of the tax rate. 
Comparing the growth of the U.S. with Europe's since the early 1990s removes the effect of the Internet. Both economies had access to the same technology and similarly educated workforces to capitalize on the Web's opportunities. Since then, the U.S. 
economy has grown 63 percent (in the period through the end of 2010); France and Germany's together grew less than half as fast. U.S. productivity growth increased from 1.2 percent a year to 2 percent while France and Germany's declined to less than 1.5 percent a year in the periods 1972-1995 versus 1995-2004. Without U.S. innovation, Europe's growth would have been lower. 
European Contrast It is true that higher labor redeployment costs slowed Europe's transition away from manufacturing. Yet that doesn't explain why young, talented European workers clung to jobs in declining industries while their American counterparts eagerly walked away from promising careers to join risky startups. 
In the U.S., higher payouts drove increased risk-taking. Success from that risk-taking raised the bar for success. The most promising U.S. students flocked to business schools and worked much longer hours than their underutilized counterparts in Europe, whose work effort declined. The success of these American workers created <a href="/topics//Google_Inc.">Google Inc.</a>, <a href="/topics//Facebook">Facebook Inc.</a> and countless other companies that gave the U.S. workforce more valuable on-the-job training. That training increased the chances for entrepreneurial success. 
Entrepreneurial success put equity into the hands of investors willing to underwrite the risks that produce innovation. No surprise, the U.S. has more equity per dollar of GDP than Europe and Japan, and has produced more innovation. Although commercializing the Internet may have created a tailwind, a lot of that tailwind was earned. 
Government spending was also much lower in the 1990s than it is today: 18 percent of GDP versus 24 percent. State and local government spending was lower, too. As a result, President <a href="/topics//Bill_Clinton">Bill Clinton</a>'s across-the-board tax increase paid down debt, which strengthened the U.S. economy. 
Today, higher taxes are needed to fund an increase in unproductive consumption, which slows growth. Taxing income that otherwise would have been invested as equity in order to retire cheap offshore debt seemed like bad economic policy in the 1990s. 
With 20-20 hindsight, however, it turned out to be an ideal time to sell overpriced equity to pay off debt. That's not the case today when equity is dear. Far from showing that tax rates and government spending have no effect of growth, the 1990s provide evidence that payoffs for risk-taking and the accumulation of equity matter. 
The debate over whether to tax, redistribute and consume income that would otherwise be invested is critical to the future of America. The nation can't afford to base its decision on superficial arguments. The country deserves better from a leader such as Warren Buffett. 
Edward Conard was a partner at <a href="/topics//Bain_Capital">Bain Capital</a> LLC from 1993 to 2007.

OPCONRAD03

Warren Buffett is wrong about the past, present and future

Buffett rurle cropped 3.21.12

While "fiscal cliff" negotiations may produce high drama for journalists and partisans as well as desperate uncertainty from Main Street to <a href="/topics//Wall_Street">Wall Street</a>, they are an absolute gold mine for wordsmiths. 
 Linguaphiles have been assiduously tracking the phrase's origin - in particular, whether there is some earlier root than Ben <a href="/topics//Ben_Bernanke">Bernanke</a>'s use of it in February to describe the scheduled combination of tax increases and spending cuts. 
 <a href="/topics//The_New_Republic">The New Republic</a> recently published an article mistakenly crediting the phrase to the author of a 1989 story in the St. Louis Post-Dispatch about a special higher-education tax. Other observers have pointed to this passage in a 1975 Dallas Morning News op-ed article by columnist Mike <a href="/topics//Kingston,_NY">Kingston</a>: "Who hasn't looked with horror at New York City's financial plight? The nation's biggest, richest city is about to go over the fiscal cliff if the state and federal governments don't lend a helping hand." But the formulation is quite a bit older. Understanding how the metaphor has been used throughout history, as well as examining a few literary antecedents, can shed light on our current mess, and help us appreciate that our situation is not unique. 
 Ben Zimmer, who writes the language column for the <a href="/topics//Boston_Globe">Boston Globe</a> and dug up the <a href="/topics//Kingston,_NY">Kingston</a> essay, has pointed to a 1957 use of "fiscal cliff," in a slightly different context, from the <a href="/topics//New_York_Times_Company">New York Times</a>. But what was new in the 1950s was only the addition of the word "fiscal." The use of the word "cliff," modified by an adjective, has long been a metaphor for economic distress. 
 For example, a 1948 article in the magazine America warned of the nation's growing infatuation with automobiles: "Monthly payments plus high maintenance costs on a car keep many a family on the edge of a financial cliff, so that they cannot afford children, housing, insurance, medical care and other items that would contribute to a really sound home life." The Saturday Evening Post, in 1953, had this to say about the early Disney studio: "But ownership had its pitfalls, too, and in the decade 1928-38 they skidded intermittently toward the edge of the financial cliff." A 1934 essay in the magazine Forum, discussing the future of the New Deal, said: "Neither will it be necessary for our nation to plunge over the edge of an economic cliff in an <a href="/topics//Orgy_(musician)">orgy</a> of price-cutting, sweatshop-opening, wage-slashing, and market- swamping." We can go back further. Zimmer noted an 1893 editorial in the <a href="/topics//Chicago_Tribune">Chicago Tribune</a>: "The free silver shriekers are striving to tumble the United States over the same fiscal precipice." Once we follow Zimmer's invitation to play more freely with the second word of the phrase, a whole landscape of metaphor opens before us. Thus, for example, we find in a 1912 issue of the journal Current Opinion a quote from a <a href="/topics//Springfield,_MA">Springfield</a>, <a href="/topics//Massachusetts">Massachusetts</a>, newspaper: "It has been found that a government by Socialists in an American city does not necessarily land the community on the brink of a social and economic precipice." An 1889 article in the American Review warned the board of an American missionary society not to let the organization "slip blindly too near the edge of a financial precipice." And a British newspaper commented, all the way back in 1866, that "Bombay still hovers on the brink of the financial precipice." In short, we can safely say that the image of finances hanging at the edge of a cliff or precipice or escarpment goes back a long way. We can't even say that the metaphor has been recently rediscovered. 
 It has been with us always because problems of finance have been with us always. That we find Bernanke's February usage the least bit interesting is a sign merely of our loss of interest in our own language. 
 There is a larger lesson. The metaphor of a cliff, with all of its dangers, is well known to literature, as is its solution. Let's consider two examples. 
 The writer Catherine George Ward Mason, in her 1823 novel, "The Cottage on the Cliff," described the cottage in words that might apply to our current bipartisan budget mess: "I have let it tumble to pieces, inch by inch, this many a long year, for the devil himself could not find a <a href="/topics//Hole_(band)">hole</a> to put his nose in, when the weather is stormy." The cliff for Ward Mason is a metaphor for life: We perch precariously, things never quite the way we want them to be. When the storm strikes, we are almost never prepared. The difference between her story and our current situation is that when Ward Mason's hero, Captain Singleton, buys the cottage for his family, he is more interested in getting the house in order than in placing blame for the mess. 
 Then there is John <a href="/topics//John_Milton">Milton</a>'s use in "Paradise Lost." He described the eagles and storks, who "On Cliffs and Cedar tops thir Eyries build." How do they manage this miracle? "In <a href="/topics//Common_(musician)">common</a>, rang'd in figure wedge thir way / Intelligent of seasons, and set forth / Their Aierie Caravan high over Sea's / Flying, and over Lands with mutual <a href="/topics//Wing_(musician)">wing</a>." The key word is "mutual." The cliff-dwelling birds of Milton's tale fly "in <a href="/topics//Common_(musician)">common</a>" because they know that cooperation, not competition, is the key to their survival. A cliff may be high and scary, but it can provide a safe and comfortable home as long as those who dwell there are concerned less with victory than with common interest. 
 Possibly we have traveled too far down the partisan <a href="/topics//Path.com">path</a> to imitate Milton's eagles and storks. Perhaps cooperation on long- term solutions is beyond us. Let's hope not. Otherwise we can safely predict that half a century hence, when the final faint <a href="/topics//Echoes_(musician)">echoes</a> of our passionate arguments have faded into history, a new generation will face its own financial escarpment. 
 Perhaps its lexicographers, researching the etymology of their own budgetary precipice, will stumble upon the vertiginous metaphors of the present day, never dreaming that their financial mess is our fault. 
 Stephen L. Carter is a Bloomberg View columnist and a professor of law at Yale University.

OPCARTER30

Carter: The 'fiscal cliff' is not new

fiscal cliff illo cropped

Dec. 2, 2012 
 MEMO 
 To: Sen. <a href="/topics//Harry_Reid">Harry Reid</a>, majority leader 
 Sen. <a href="/topics//Mitch_McConnell">Mitch McConnell</a>, minority leader 
 Rep. <a href="/topics//John_Boehner">John Boehner</a>, speaker 
 Rep. <a href="/topics//Eric_Cantor">Eric Cantor</a>, majority leader 
 Rep. <a href="/topics//Nancy_Pelosi">Nancy Pelosi</a>, minority leader 
 &nbsp; 
 You, lady and gentlemen, are negotiating the most important fiscal roadmap the United States has had to draw up in a century or more. Our future economic prosperity rides on what you do. You will be judged by history and the voters on your performance in this negotiation as on nothing you have previously done in public life. 
 As background for these negotiations, I offer the following primer: 
 1. Total tax revenue in the United States is lower today as a percentage of gross domestic product than in any of the wealthy northern democracies. 
 2. The federal government now <a href="/topics//Income_Taxes">taxes</a> earnings from work (through income and payroll <a href="/topics//Income_Taxes">taxes</a>) at a higher rate than it <a href="/topics//Income_Taxes">taxes</a> investment income and capital gains. Unlike most developed countries, we have no national consumption tax. 
 3. U.S. businesses pay on average an effective tax rate (what they actually pay, not what the "official rate" is) of around 13 percent, about 3 points below the average of the world's northern developed economies, and lowest among the G-7 industrialized democracies. 
 4. Those Americans who have had their taxes go down the most in recent years are the wealthiest among us. The top 1 percent of taxpayers paid an effective average federal income tax rate of about 23 percent in 2008, about one-third less than what they actually paid in 1980, although their incomes grew in both real and relative terms since then. 
 5. The U.S. defense budget is larger than the military budgets of the next 14 biggest spenders combined. This conveys a rough sense of how much more we spend on defense than other countries, both absolutely and proportionately, and suggests there is room for prudent reductions. 
 And beyond that background, here are a few ideas I hope you'll keep in mind: 
 A good agreement among you will have three elements -- not just revenue and cuts, but also an investment component. We need to grow and to build, not just tax and diet. 
 Make sure to figure out how your agreement will affect state and local governments. They represent 15 percent of our GDP and employment. Senior officials in both <a href="/topics//U.S._Congress">Congress</a> and the executive branch confirm privately that they normally pay little attention to the impact on local governments when shaping federal fiscal policy. The package you produce needs to encourage state and local stability, not force them into layoffs and cuts that will worsen the <a href="/topics//Economic_Recession">recession</a>. For example: Tell any state that can slow the increase in Medicaid spending to 3 percent or less per year that it can keep half of the money saved vs. the rate Medicaid spending increased nationally the previous year. 
 Also on health, remember it is the growth in spending on Medicaid and Medicare that most needs to be slowed down. The recent penalties for hospitals admitting as many as one in five patients for a second time within a month of release is an example of the kind of measures that can incentivize cost-limiting behavior without sacrificing quality of care. 
 Tell the president you want him to find a federal job for any member of Congress who votes for the package and is defeated in 2014 because of that vote. If <a href="/topics//Abraham_Lincoln">Abraham Lincoln</a> did it, you and <a href="/topics//Barack_Obama">President Barack Obama</a> can do it too. 
 And here's one other daring idea: Keep a list of all the breaks and gimmicks that lobbyists for special interests propose and then make them public at the end of the process. Let citizens see which ones wanted to feather their own nests and how they proposed to do it. And show us at this critical moment that you resisted private gain in favor of the public good. 
 Peter Goldmark, a former budget director of <a href="/topics//New_York_(state)">New York</a> State and former publisher of the International Herald Tribune, headed the climate program at the <a href="/topics//Environmental_Defense_Fund">Environmental Defense Fund</a>.

News

OPGOL02

Goldmark: A 'fiscal cliff' note to Congress

The tag team of fiscal responsibility is at it again. And one of their targets is the self-styled emperor of anti-taxation. If <a href="/topics//U.S._Democratic_Party">Democrat</a> <a href="/topics//Erskine_Bowles">Erskine Bowles</a> and <a href="/topics//U.S._Republican_Party">Republican</a> Alan <a href="/topics//Alan_Simpson">Simpson</a> had their way, <a href="/topics//Grover_Norquist">Grover Norquist</a> would be put into a Santa suit and stuffed down a chimney. 
 When sworn in, members of <a href="/topics//U.S._Congress">Congress</a> pledge to defend the Constitution and the American people generally. The presumption (and it is just that) is that lawmakers will not have any outside allegiances that will get in the way of that. 
 But over the decades hundreds of <a href="/topics//U.S._Republican_Party">Republican</a> lawmakers have ceded their right to make an independent judgment based on need and rational thought about taxation to a portly little lobbyist. They have pledged to Norquist, who runs <a href="/topics//Americans_for_Tax_Reform">Americans for Tax Reform</a>, never to raise income taxes no matter what the circumstances. They have done so under threat of electoral annihilation. 
 Now it seems that Norquist's hold on the purse strings of their political fortunes has begun to loosen -- even if only slightly -- in the face of the predicted fiscal disaster at the end of December. Several <a href="/topics//U.S._Republican_Party">GOP</a> members of <a href="/topics//U.S._Congress">Congress</a> have indicated they would be willing to put the needs of the nation ahead of Norquist's demands. It is clear some tax compromise must take place as a part of any solution. 
 Without compromise the country will tumble over the fiscal cliff into a deep chasm of indiscriminate spending decreases, across-the-board tax increases and obvious <a href="/topics//Economic_Recession">recession</a>. Simpson and Bowles predict an inescapable disaster of enormous proportions. 
 They say economic growth will slow by 3.5 percent, <a href="/topics//Unemployment">unemployment</a> will top 9 percent with 2 million more Americans out of work, the market will crash and there will be a serious downgrading of the nation's bond rating. That's probably just for openers. 
 These aren't new assessments from the Dynamic Duo, who as co-chairs of the national commission to lower the debt and lead us out of the financial wilderness have stumped the country for two years determined to make someone take them seriously. 
 Even most of their fellow commission members couldn't agree on much of anything except that down the road apiece there could be massive economic collapse. The man who appointed them, <a href="/topics//Barack_Obama">Barack Obama</a>, just seemed to ignore their rants. But Simpson, a former senator, and Bowles, a former White House chief of staff and university president, have not given up. After two years of frustration, suddenly there are listeners out there. 
 With the crisis upon us some lawmakers once steadfastly committed to Norquist may be willing to switch their allegiance to the people in a rare show of statesmanship. While certainly not a tidal shift, it is encouraging. As the humorist Kin Hubbard once said, "Now and then an honest man is sent ... to the legislature." But going against the emperor of anti-taxation is chancing defeat two years from now. Norquist considers opposing any new revenues through tax increases even for the very rich a sacred trust that perhaps the Almighty has anointed him to defend. 
 Winning compromise also requires the president and <a href="/topics//U.S._Senate">Senate</a> <a href="/topics//U.S._Democratic_Party">Democrats</a> to put aside their longtime refusal to do anything to reform runaway entitlement costs. They oppose even obvious reforms like raising the Social Security eligibility age to 68 or 69 given that life expectancy is almost 80, not the 55 it was when Chancellor Otto von Bismarck used 65 to gauge who among the German people would receive a pension. 
 So what are the chances that both parties in Congress, with strong leadership from a White House that clearly has yet to provide it, will do anything far reaching to avoid the crash? It's going to be a tough situation, Simpson says, as long as any of it depends on overcoming Norquist. Perhaps it won't be as tough as they think. Although the emperor has been making noises that could be regarded as confidence if one stretches it enough, it seems he might be, as my grandmother used to say, doing some whistling past the <a href="/topics//Graveyard_(musician)">graveyard</a>. As the always-colorful Simpson says, "anyone who doesn't have rocks in his head" can see what Americans are facing and compromise is the only solution. Hold your breath and pray. 
 Dan K. Thomasson is the former editor of the Scripps Howard News Service.

OPTHOMASSON29

Thomasson: Grover Norquist loses power

It seems likely that we will be hearing about the tortuous dramas of the "fiscal cliff" until the calendar closes on 2012. The president took his <a href="/topics//Case_Western_Reserve_University">case</a> to business leaders this week and will speak tomorrow to workers at a <a href="/topics//Pennsylvania">Pennsylvania</a> toy factory, in an effort to ratchet up pressure on <a href="/topics//U.S._Republican_Party">Republicans</a> in <a href="/topics//U.S._Congress">Congress</a>. 
 Meanwhile, House Speaker <a href="/topics//John_Boehner">John Boehner</a> (R-<a href="/topics//Ohio">Ohio</a>), is threatening to push the country into default unless there are drastic spending cuts. And so the wrestling match continues, teetering as close to the Jan. 1 "cliff" edge as possible. 
 Many Long <a href="/topics//New_York_Islanders">Islanders</a>, I suspect, will be watching how the debate settles over who is wealthy and who is middle class. <a href="/topics//Barack_Obama">President Barack Obama</a> has drawn the line at earnings of $200,000 for an individual, and $250,000 for a household. He wants to extend tax cuts for everyone below those annual incomes. 
 However, this income cutoff is unfair to high-cost areas like Long Island, as some <a href="/topics//U.S._Democratic_Party">Democrats</a> have acknowledged. In 2010, Sen. <a href="/topics//Chuck_Schumer">Charles Schumer</a> (D-N.Y.) floated the idea of raising taxes only on $1-million-plus incomes. A year earlier, Rep. <a href="/topics//Steve_Israel">Steve Israel</a> (D-Huntington) was one of eight co-sponsors of a bill, the Tax Equity Act, that would have adjusted federal income tax brackets to account for regional differences in the cost of living. 
 The bill was popular in the Northeast: Seven co-sponsors were from <a href="/topics//New_York_(state)">New York</a>, and the eighth, Rep. <a href="/topics//Jim_Himes">Jim Himes</a>, represents Fairfield County, Conn. But the bill went nowhere. 
 This year during election season, many more <a href="/topics//U.S._Democratic_Party">Democrats</a> saw the light and began publicly questioning whether $250,000 was the right cutoff. House Minority Leader <a href="/topics//Nancy_Pelosi">Nancy Pelosi</a>, who represents pricey San Francisco, in May called for a vote to make the tax cuts permanent for anyone making less than $1 million a year. Florida Sen. Bill Nelson and North Dakota Sen.-elect Heidi Heitkamp also supported extending tax cuts for those making less than $1 million. Candidates from Missouri to Nevada to Virginia said $250,000 was perhaps too low. Some floated figures of $400,000 or $500,000 instead. 
 This campaign-trail flirtation with a compromise obligates Democrats to at least consider a higher-income cutoff. 
 There are two reasons this is important to Long Island -- and, indeed, to high-cost regions around the country. First, many Long <a href="/topics//New_York_Islanders">Islanders</a> would be affected by the higher tax rate. The IRS doesn't publish data for the $250,000 income level, but about 100,000 Long Island households made more than $200,000 in 2009, according to census figures. 
 People making $250,000 a year don't necessarily feel wealthy. Their household could consist of a teacher and a police officer -- in other words, middle class occupations. At that income, it's not always possible to fund what most Americans would agree is a middle-class life: the ability to save for retirement, afford a home and educate one's children. 
 More <a href="/topics//Income_Taxes">income taxes</a> -- on top of high-priced homes, local taxes, transportation, recreation and education -- would make this area even less affordable. We are already bleeding retirees to North Carolina, and graduates to everywhere else. 
 To be sure, it may be hard to muster sympathy for a $250,000-earner when the median family income nationwide is $62,300. And bumping the cutoff from $250,000 to $1 million would lose the government $366 billion in revenue over 10 years, according to the nonpartisan Center for Budget and Policy Priorities. 
 But fairness dictates a second look for high-cost regions. For many people, another few thousand dollars in taxes just isn't affordable.

OPMIC29

Michaud: 'High income' is not as much on Long Island

Obama Boehner Cropped

Congress returned to "work" this week (now there's a laugh) to complete its lame-duck session before taking another holiday. Spending other people's money is a taxing experience. 
 Their task is to avoid the "fiscal cliff," a geological construct of their own making. It doesn't take a genius to predict both parties will try to do two things: (1) reach an agreement that will allow each side to take some credit and (2) require those who work for a living to pay government more while they come up with phony, or inconsequential spending "cuts." 
 Whatever they do, payroll taxes are going up January 1 and new taxes associated with Obamacare will soon follow. It is beyond argument that additional revenue isn't the solution to the problem of uncontrolled spending. 
 According to usgovernmentrevenue.com, writer Christopher Chantrill's "resource on government taxes and receipts in the United States," "Total revenue at all levels of government in the United States is 'guesstimated' to be $5.5 trillion in 2013." Unfortunately, our projected debt will be $17.5 trillion. Absent reforms, the U.S. <a href="/topics//Senate_Budget_Committee">Senate Budget Committee</a> predicts the federal government could be $20 trillion in debt by 2016. Clearly, it's not lack of revenue that is driving the debt; it is lack of spending restraint. 
 How much more should we subsidize government irresponsibility? If the answer is "not another dime" perhaps the time has come for a taxpayer revolt. 
 In 1978, the late Howard Jarvis and his wife led a successful drive to put Proposition 13 on the California ballot. The measure, which was overwhelmingly approved by voters, limited rapidly rising property taxes. According to the Howard Jarvis Taxpayer Association website, Proposition 13 "has saved Californians $400 billion and allowed millions of Californians to keep their homes." 
 What is needed is a leader with the determination of Howard Jarvis who can organize nationally to keep government from constantly pilfering the assets of the productive so politicians can subsidize the unproductive, buy their votes and addict them to entitlements. 
 As long as taxpayers continue to acquiesce to the politicians in their never-ending search for more revenue, they will keep taking it, all the while attacking "millionaires and billionaires" for not paying their "fair share." 
 Perhaps the revolt can start with the so-called "rich," those making more than $250,000 a year. That has always been an arbitrary figure applied to all, regardless of their personal circumstances. Suppose people who are able decided to limit their income to $249,999.99 in 2013? If they make a lot more than that, they could consult their tax adviser about legally placing the excess in tax-free municipal bonds or other tax shelters, depriving the government beast its sustenance. 
 The tax system in this country is based on willful compliance. It wouldn't take many "I'm as mad as Hell, and I'm not going to take this anymore" taxpayers to creatively, but legally, withhold from the government some of the money they earn. 
 Members of both parties are guilty of not reforming entitlements and failing to put the people first. Their intransigence is robbing future generations of their right to economic independence and economic growth. 
 America was birthed during a tax revolt. Expecting politicians to fix a problem of their own making rarely succeeds. Maybe it's time to force the issue by having taxpayers go on strike. It sometimes works for labor unions. Giving more money to the government hoping it will responsibly spend it is like offering a child chocolate and expecting him not to eat it. 
 Yes, it sounds impractical and some will say it isn't doable. But what other avenues are open to wealth creators? The government has become an enormous panhandler, constantly asking for ever-greater amounts of other people's money. Let's tell them "no more" at least until we see real spending reform and policies that result in economic growth, which by itself would produce more tax revenue. 
 Absent members of Congress acting responsibly, does anyone have a better idea? If so, send it to me. I eagerly await all legal and credible suggestions.

Thomas: Taxpayers should revolt over Congress' handling of 'fiscal cliff'

congress capitol washington cropped

While we're on the topic of the fiscal cliff (that's what everyone's talking about, isn't it?) let's not forget that there's one hefty sum <a href="/topics//U.S._Congress">Congress</a> and the president could raise without too much trouble. 
 In April, a <a href="/topics//University_of_Tampa">University of Tampa</a> professor, Ryan Cragun, and two students examined U.S. tax laws to estimate the cost of tax exemptions for religious institutions. They came to the conclusion that by denying religious institutions tax exemptions on property donations, business enterprises, capital gains on investments and sales and "parsonage allowances," the Treasury could raise as much as $71 billion a year. 
 Right now there are two complaints percolating through the <a href="/topics//Internal_Revenue_Service">Internal Revenue Service</a> that challenge the ability of churches to take political stands and maintain their tax-exempt status. A watchdog group called <a href="/topics//Citizens_for_Responsibility_and_Ethics_in_Washington">Citizens for Responsibility and Ethics in Washington</a> is asking the IRS to "investigate the U.S. Conference of Catholic Bishops for engaging in prohibited political activity in violation of its protected tax status." The Wisconsin-based <a href="/topics//Freedom_from_Religion_Foundation">Freedom from Religion Foundation</a> has filed a complaint with the IRS about the activities of the <a href="/topics//Billy_Graham">Billy Graham</a> Evangelistic Association. 
 The bishops under investigation told Catholic laypersons they would go to hell if they voted for <a href="/topics//Barack_Obama">President Barack Obama</a>. Billy <a href="/topics//Billy_Graham">Graham</a>'s group ran newspaper ads in the <a href="/topics//Wall_Street_Journal">Wall Street Journal</a>, <a href="/topics//USA_Today">USA Today</a>, and others, pressing voters to vote for candidates who support, "the biblical definition of marriage between a man and woman" and who protect "the sanctity of life." There was only one such presidential candidate and that was <a href="/topics//Mitt_Romney">Mitt Romney</a>. 
 In addition, the <a href="/topics//San_Francisco_Chronicle">San Francisco Chronicle</a> online reports that before election day this year some, "1,600 religious leaders around the country ... talked politics from the pulpit, in an organized movement challenging a 1954 federal law that bans churches from supporting candidates during worship services. The Pulpit Freedom Sunday movement, organized by a Christian legal group in <a href="/topics//Arizona">Arizona</a> called Alliance Defending Freedom, encouraged pastors to 'preach a biblically based sermon regarding candidates and the election without fearing that the IRS will investigate or punish the church,' according to the group's website." This effort was designed to provoke lawsuits. The 1954 law is rarely if ever enforced, but before that era, American churches received no special exemptions from the IRS. Even today churches are taxed if they engage in commercial activities and in certain other circumstances. They seem to do just fine, notwithstanding. 
 They were granted tax-exempt status because they were seen at the time as doing local communities an awful lot of good. And they legitimately still do some of that. But in the intervening half-century, some (not all) churches have become politically biased and outspoken. 
 This is where churches begin to undo the good that they legitimately perform (feeding the hungry and clothing the poor) and start contributing to an even more divided nation. That does no U.S. citizen any good. 
 Not all churches take political positions, and those that don't should not lose their tax-exempt status. But it's clear that when preachers allow politics to invade the pulpit, they have moved from being an asset to the community, into being an agent for increased divisiveness. 
 Eventually I believe the IRS and the Supreme Court will move to eliminate tax exemptions for politically divisive churches. That won't happen anytime soon, but as churches become more like businesses and less like community do-gooders, this change seems inevitable. So while <a href="/topics//U.S._Congress">Congress</a> is considering increasing individual tax rates and eliminating the home mortgage deduction, it might as well throw taxing politically active churches into the mix. 
 Bonnie Erbe, a TV host, writes this column for Scripps Howard News Service.

OPERBE28

Erbe: Reconsider tax exemptions for religious institutions in 'fiscal cliff' discussions

redistribution-op

As negotiations over the fiscal cliff get down to details, they will become more arduous - something that financial markets seem to be ignoring. The superficial appeal of proposals to limit tax expenditures, for example, will fade as the details become clearer. 
 Whether the negotiators can navigate the obstacles and still get a deal done before Dec. 31 remains an open question. Automatic tax increases and spending cuts are scheduled to take effect at the beginning of January. 
 On their face, proposals to raise revenue by limiting tax breaks enjoy unusual bipartisan support - at least when they are described generically as "broadening the tax base and eliminating loopholes." Enacting legislation, though, requires much more than such platitudes, and therein lies the political difficulty. 
 Take the recent proposal to limit itemized deductions to a maximum of $50,000 a year. According to the <a href="/topics//Tax_Policy_Center">Tax Policy Center</a>, that would raise more than $700 billion over the coming decade, almost as much as the marginal-rate increases the Barack <a href="/topics//Barack_Obama">Obama</a> administration is proposing for high-income taxpayers. Because median household income is also about $50,000, that level of allowable deductions strikes most people as extraordinarily generous, adding to its luster. 
 Perhaps more important, the proposal doesn't specify which deductions would be limited, but rather leaves that up to the individual. It thus reflects the new fundamental law of political economy: The vaguer the proposal, the better. 
 Let's take a closer look at the effects of such a limit, though. In 2009, according to data from the <a href="/topics//Internal_Revenue_Service">Internal Revenue Service</a>, taxpayers who itemized their deductions and had incomes of more than $200,000 had average deductions of $50,000 or more. 
 For those with $200,000 to $500,000 in income, average deductions amounted to more than $51,000; from $500,000 to $1 million in income, the average was more than $100,000. At higher incomes, the averages rose further. 
 That households with incomes of more than $200,000 would be disproportionately affected by the deduction limit is neither surprising nor necessarily troublesome. Here comes the problem. In 2009, those taxpayers deducted more than $300 billion, 90 percent of which came from just three categories: taxes paid (mostly state and local taxes), home-mortgage interest and charitable contributions. 
 Of the big three, charitable giving is the most discretionary (unless a family moves to a smaller house with a smaller mortgage, or a city or state with lower taxes). The charitable sector thus has the most to lose from a limitation on itemized deductions. 
 How much money is involved? In 2009, households with incomes of more than $200,000 claimed almost $60 billion in charitable deductions - or about 20 percent of total charitable giving in the United States that year. Households with incomes of more than $10 million claimed an average of $1.75 million each in charitable donations in 2009, and they accounted for roughly 5 percent of all giving. 
 Charitable giving reacts to tax incentives, and in response to any limits on deductions it could even fall by about the same amount as the increase in the tax bill, according to John List of the <a href="/topics//University_of_Chicago">University of Chicago</a>, who recently reviewed the literature on this subject. Other studies have suggested an effect about half as large. Even that smaller estimate, though, suggests that limiting deductions to $50,000 a year could easily reduce giving by tens of billions of dollars. 
 How long do you think it will take the charitable sector to figure this out? This is just one way in which the $50,000-limit idea is likely to become less politically attractive. In addition, there are important questions about the proposal's design. For example, above the $50,000 limit on deductions, the tax incentive disappears. Below that threshold, though, the per- dollar tax break would still be tied to the individual's marginal-tax rate. As I have written before, it would be fairer and more efficient to replace a wide variety of deductions with flat-rate credits. 
 What's more, evidence suggests that charitable giving would be higher if the tax incentive took the form of a matching credit (which goes to the charity) rather than a rebate (which goes back to the individual). So rather than curtail the tax deduction for charitable giving indirectly, through a $50,000 limit on all itemized deductions, it would be far better to replace the existing deduction with a flat credit that would go to the charity. 
 Under this approach, if someone gave $1 to a charity, the government would also contribute, say, 15 cents more to that charity in the form of a matching tax credit. (It may be necessary for both constitutional and policy reasons to exclude religious organizations from this matching credit. Such organizations could, though, continue to <a href="/topics//Benefit_(designer)">benefit</a> from a simple flat-rate tax credit that takes the form of a rebate, as with the existing structure.) The tax subsidy per dollar of charitable giving would no longer depend, as it does today, on the individual's marginal-tax bracket. 
 The bottom line? The legislative process will soon reveal the flaws in vague, simplistic strategies to limit tax deductions. If we are going to put in the effort to reform the tax code, we should at least try to do it right. 
 Peter Orszag is vice chairman of corporate and investment banking at <a href="/topics//Citigroup">Citigroup</a> and a former director of the <a href="/topics//Office_of_Management_and_Budget">Office of Management and Budget</a> in the <a href="/topics//Barack_Obama">Obama</a> administration.

OPORZSAG28

Orszag: Why plans to limit tax breaks may soon die

Every lobbyist in Washington knows that whoever can advocate that the government do nothing or defer a matter until later has the advantage. 
 Keep this in mind as the negotiations for avoiding the "fiscal cliff" unfold, especially since "do nothing" has a powerful ally in <a href="/topics//U.S._Congress">Congress</a>. Sen. <a href="/topics//Patty_Murray">Patty Murray</a>, D-Wash., is the unapologetic leader of the do-nothing forces, and as the incoming chairman of the <a href="/topics//Senate_Budget_Committee">Senate Budget Committee</a>, she is in a good position to stop any action. The liberals have valid reasons for wanting the tax increases and the automatic cuts to defense spending to proceed unabated. The recession and additional dependency that would follow would produce a society that is more to their liking anyway. 
 As an added bonus for <a href="/topics//U.S._Democratic_Party">Democrats</a>, a Pew poll found that 53 percent of Americans would blame the <a href="/topics//U.S._Republican_Party">Republicans</a> in <a href="/topics//U.S._Congress">Congress</a> if the two sides cannot reach an agreement, while only 29 percent would blame the president. <a href="/topics//U.S._Republican_Party">Republican</a> leaders haven't convinced even the rank and file of our own party that our leaders in Washington aren't the problem. 
 Anecdotally, in talking to people from around the country over the <a href="/topics//Thanksgiving">Thanksgiving</a> holiday, I did not get a sense of worry or urgency about the fiscal cliff. Informed <a href="/topics//U.S._Republican_Party">Republican</a> regulars mostly shrug at the idea of their taxes going up. They are deflated by the election results and appear ready to accept what they think is inevitable. 
 If we cave on taxes and the debate becomes consumed by what budget cuts the <a href="/topics//U.S._Republican_Party">Republicans</a> want to make and the programs the <a href="/topics//U.S._Democratic_Party">Democrats</a> want to defend, we lose politically and no good policy is created. So far, the focus of the discussion in the media is mostly about Republicans and taxes, not about entitlements and spending restraint. 
 An unalarmed public, a wounded <a href="/topics//U.S._Republican_Party">GOP</a>, a media obsessed with Republicans and taxes and the Democrats sitting in the favored position of "winning" if Washington does nothing all combine to give the president and his team a big advantage. 
 Ed Rogers is a co-host of The Insiders blog, offering commentary from a Republican perspective on Election 2012.

OPROGERS28

Rogers: How Barack Obama benefits from gridlock in Washington

Sometimes "who says it" is just as important as "what they say." 
 So it is with Warren <a href="/topics//Warren_Buffett">Buffett</a>'s op-ed about taxes and fiscal reality in the <a href="/topics//New_York_Times_Company">New York Times</a> this week. This is the "Oracle of Omaha," acknowledged the best investor of the past 50 years, the wise man of finance, a man outside the political and ideological battles of Washington. 
 What Buffett says is straightforward and obvious: 
 1. Raising the marginal tax rate to <a href="/topics//Hillary_Rodham_Clinton">Clinton</a>-era levels will not have any impact on investment decisions. Indeed economic growth was robust during periods of much higher marginal rates - benefiting both the wealthy and the middle class. Recall that this was the same conclusion that the <a href="/topics//Congressional_Research_Service">Congressional Research Service</a> reached in a report <a href="/topics//U.S._Republican_Party">Republicans</a> recently tried to suppress. 
 2. Cuts in tax rates have given, as Buffett puts it, "a huge tail wind" to the super rich. These folks paid an average tax of 26.4 percent in 1992, but only 19.9 percent in 2009, on average income of $202 million. As <a href="/topics//Warren_Buffett">Buffet</a> says, this is an "outrage." 3. There should be, according to Buffett, an absolute minimum tax of 30 percent on income between $1 million and $10 million, and 35 percent above that. No loopholes, no hidden games, keep it simple. 
 4. The most important point. Over the long haul, government should set its goals at spending 21 percent of GDP, and raising 18.5 percent in revenue, leaving a gap - an annual deficit - of about 2.5 percent of GDP. That is manageable with a growing economy. And these figures are close to our historical norms. The crisis of the past few years has been that revenue fell to 15.5 percent of GDP while spending crept up to 22.4 percent. 
 An annual deficit of 7 percent of GDP is not manageable. But notice, the most significant deviation has been the revenue decline, not the spending increase! We should spend about 21 percent of GDP, but are spending 22.4 percent. We should collect 18.5 percent in revenue, but are collecting only 15.5 percent. 
 So listen to the wisest investor in America: Raise marginal rates, run a consistent but manageable deficit, and stop worrying about those at the top of the income spectrum. 
 It sounds very simple and reasonable, especially coming from Warren Buffett. 
 Spitzer, former governor of New York, hosts "Viewpoint" on <a href="/topics//Current_TV">Current TV</a>.

OPSPITZER27

Spitzer: Warren Buffett right to suggest 30 percent minimum tax for rich

In business I found that a challenging environment often produced our best opportunities. Perhaps that's why I see the so-called "fiscal cliff" of year-end spending cuts and tax increases not as an impassable precipice but as our best opportunity to finally enact meaningful fiscal reform. 
 I hear Washington watchers and people in the hallways of <a href="/topics//U.S._Congress">Congress</a> saying there is not enough time to get this done this year. I disagree. The hard part has already been done. Over the past two years, the options for reaching a $4 trillion deficit reduction deal have been drafted, charted, graphed, circulated, evaluated, dissected, leaked, reported, debated and then put on the shelf for another day. 
 That day has come. 
 The fiscal cliff is a deadline of the 112th <a href="/topics//U.S._Congress">Congress</a>'s making. We have had two dry runs over the past two years. No Congress is better suited to address these issues than this one. It is our responsibility to solve these problems now. 
 Kicking the can down the road - setting up a process for token deficit reduction today with the promise of more reforms later - is misguided and irresponsible and shows a total lack of courage. 
 At best, a "small" deal will leave us facing another cliff, selecting down the line from the same menu of policy options before us today. The only difference will be that the <a href="/topics//Hole_(band)">hole</a> we're digging out from will be even deeper. Instead of debating a process to employ during future negotiations, let's choose from the options before us, which are more plentiful and less draconian than they will be down the road. 
 I have shared with House and <a href="/topics//U.S._Senate">Senate</a> leaders as well as the <a href="/topics//White_House">White House</a> a 242-page bill that, along with other agreed-upon cuts that are to be enacted, would produce $4.5 trillion in fiscal reforms and replace sequestration. While I know this bill can be improved, it shows clearly that we can do what is necessary, today, with relatively simple legislation. The proposal includes pro-growth federal tax reform, which generates more static revenue - mostly from very high-income Americans - by capping federal deductions at $50,000 without raising tax rates. It mandates <a href="/topics//Common_(musician)">common</a>-sense reforms to the federal workforce, which will help bring its compensation in line with private-sector benefits, and implements a chained consumer price index across the government, a more accurate indicator of inflation. It also includes comprehensive Medicare reform that keeps in place fee-for-service Medicare without capping growth, competing side by side with private options that seniors can choose instead if they wish. Coupled with gradual age increases within Medicare and Social Security; the introduction of means testing; increasing premiums ever so slightly for those making more than $50,000 a year in retirement; and ending a massive "bed tax" gimmick the states use in Medicaid to bilk the federal government of billions, this reform would put our country on firmer financial footing and begin to vanquish our long-term deficit. 
 I am encouraged that leaders of both parties have shown openness toward a long-term solution. House Speaker <a href="/topics//John_Boehner">John Boehner</a> has pledged to put raising revenue on the table as long as it is accompanied with fundamental reforms to entitlements, especially Medicare. And <a href="/topics//Barack_Obama">President Obama</a> has indicated a willingness to tackle entitlement reforms if accompanied by revenue. 
 The challenge we face isn't one of intellect, aptitude or time; it's a test of political courage. 
 The 112th Congress can be remembered as responsible elected leaders who put America on a path to fiscal solvency, unleashing a period of economic growth, job creation and innovation - a tremendous legacy. Or we can be known as a feckless Congress and a feckless president who abdicated this responsibility and continued to saddle the country with debt, uncertainty and a void of leadership. If we choose to rise to the occasion and place this fiscal issue firmly in the rear-view mirror, we can begin next year focusing on those things that ensure America's greatest days still lie ahead. 
 The writer, a <a href="/topics//U.S._Republican_Party">Republican</a> senator from <a href="/topics//Tennessee">Tennessee</a>, is a member of the <a href="/topics//U.S._Senate">Senate</a> Banking Committee.

OPBARKER26

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This is not a partisan issue for me; it is a human one.

Stop playing politics with children's lives

The Point is Newsday Opinion's daily newsletter inside the local, city and state political scenes.

Federal bribery case has unique Trump and LI angles

Most universities will end up competing harder for high-schoolers.

This demographic cliff is reshaping universities. Cities are next

Postponing treatment is almost always worse.

Social Security and Medicare's insolvency dates don't matter. Insolvency does

It took guts to sign this document, knowing the consequences of failure.

Musings: The Declaration set a historic blueprint

Musings: Alzheimer's is my new reality

Musings: Masking up is a personal choice

There are reasons to celebrate, amid deep polarization, divisions and disappointment.

As America turns 250, see our many truths

See Matt Davies' latest cartoon

Ronkonkoma Hub parking, Social Security, U.S. Open fans, addiction

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Nassau County and Suffolk County editorials, columns, guest essays, cartoons, letters and more.

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