Wednesday, December 26, 2012

What I'll Be Looking for in a Fiscal Cliff Deal

Andy Warhol, Dollar Sign, 1981
Sotheby's New York Sale N08554, May 10, 2012

As America's government faces yet another self-inflicted, artificial crisis at the close of this year, the so-called fiscal cliff, I offer my own observations on what we should look for in a deal to address the problem. I'm not an economist or an attorney or a politician, so I am going to give my opinions as a common citizen and try to use something I like to call common sense.

The draconian tax increases and spending cuts mandated under current law are not what we need right now as we struggle to regain our economic foothold. But it is unrealistic to think we can continue with no tax increases and no spending restrictions as this will make our deficit even more unmanageable and will ultimately mean a significant decline in American prosperity and influence as we are forced to put more and more of our resources into servicing the national debt.

There are no easy solutions remaining and certainly no solution will be popular. Any politician who is honest and tells us the party is over and things are going to be tough for a long time is not going to get reelected. But I'm just a blogger and I'm not running for anything so I'll say it: the party is over and things are going to be tough for a long time to come. Still, that doesn't mean we should pass the huge debt on to our children.

So then, here are five things that I'll be looking for in a fiscal cliff deal out of Washington, if there is one.

1) Neither party will be very happy with the outcome of the negotiations. If the press depicts one side as having "won," that may be a sign that we're in even more serious trouble. A deal is going to have to be based on compromise rather than intransigence. Spending is going to have to be reduced at least a little and taxes are going to have to rise at least a little. There is simply no other way to deal with a massive $16 trillion deficit. As the economy improves, government revenues will improve, but what is important is that the national debt remains manageable in good times and bad.

2) Solutions are enacted now. Delaying the day of reckoning another six months or a year is unacceptable. The closer we get to the next election, the more difficult it will be for Congress to accomplish anything.

3) Fixes should have built-in adjustments for inflation. OK, I know this will never happen. But if you set a higher tax rate for those making over $250,000, or over $1,000,000, don't leave the number there forever. Adjust it for inflation. The same goes for the exemption to the alternative minimum tax and the wage base limit on FICA contributions from paychecks. The value of a dollar declines every year. Hey, this isn't rocket science.

4) There should be a permanent fix for the Medicare Sustainable Growth Rate. There is no advantage to revisiting the same problem every December 31 and being unable to do anything except sweep the problem under the rug for one more year.

5) The debt ceiling, another crisis created by bad legislators, is fixed permanently along with the fiscal cliff issues. If Congress authorizes any deficit spending, the debt ceiling should automatically be raised to accommodate it. Period.

So, there you have it. Maybe I'm being a little simplistic, but I think we should all be demanding more of our elected representatives, not less. I'm not very confident that any of these five things will happen, but I see no harm in setting the bar high for our elected leaders.

If these leaders can't come to an agreement, I'd be happy to offer my services in binding arbitration. Let's get the deal done this week. Oh, but the government will have to compensate my boss for the lost time.


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