Really, it shouldn’t be so hard to put together a deal on the fiscal cliff, right? Yes, both sides have drawn lines in the sand, but we are down to the end of the year and it should be possible to put together some kind of scaled-back deal, shouldn’t it?
So, let’s start with taxes, what we call the Bush tax rates and the Bush tax cuts.
First, on rates. The President doesn’t want to extend them for top income earners, the Republicans want to extend them for all working Americans.
The GOP can’t stand the $250,000 income threshhold put forward by the President, Republicans have talked about a $1 million figure – so maybe we could grab something in between, like between $500,000 and $700,000.
Okay, that’s solved.
Now we throw in some extras that have to be part of the deal, like the yearly patch to make sure the Alternative Minimum Tax does not grab too many Americans.
Sooner or later, the Congress will need to approve a larger tax reform law so they can write that out of the tax code, but that’s not going to happen this year.
You might have to add in something on the Medicare “Doc Fix” and provisions to extend long term jobless benefits, something being sought by Democrats.
To placate Republicans, a final deal might need to include the “tax extenders,” a group of business and personal tax breaks that never are made public, but just get “extended” a year or two at a time.
As for other tax breaks, many lawmakers would probably want to extend the Bush tax cuts that expanded marriage tax relief provisions and the child tax credits, along with stimulus measures that bolstered the Earned Income Tax Credit.
Remember, we are putting together a bipartisan deal here, not a one-sided tax and budget plan, or a plan that will balance the budget. This is a political deal.
One thing Republicans badly want is to prevent a big increase in estate taxes from 35%-55% and a drop in the exemption level from over $5 million to $1 million – maybe that kind of provision could be horsetraded for something Democrats want.
On the spending side, it’s hard to believe that both sides can agree on something big at this point in time, but maybe they decide to hold off on some of the scheduled across the board budget cuts?
Maybe instead of $100 billion this year, make the savings $50 billion, but leave in place the cuts in future years to show that you are serious about deficit reduction. Will there be extra spending reductions as well? Hard to say.
But you can also include some handshake deal to consider true budget changes in 2013 along with entitlement reforms.
You can get all that ready to be passed by January 2, and we all give out high-fives and then convene the new Congress the next day.
Once you’re done with that, then you use the Hurricane Sandy disaster aid bill that will soon be approved by the Senate to add in all kinds of legislative extras like a Farm Bill extension and more.
Okay, that’s a back-of-the-envelope effort to solve this fiscal cliff impasse and put the wraps on the 112th Congress.
If you don’t like the details, it is understandable – but compromise means you have to accept some things you don’t like.
Or if you don’t want to compromise, you just stick with what the Congress has already voted to do.
Remember, the Congress and the President agreed two years ago to extend the Bush tax rates and cuts until the end of 2012. That deadline is almost here.
Remember, the Congress and the President agreed last August to $1.2 trillion in automatic budget savings over 10 years, if lawmakers couldn’t agree on any other plan. And that’s where we are now.
This shouldn’t be that hard to solve, but it is politics, and that means there are deeply held beliefs on both sides.
“I see no reason to change my opinion from that which I held when I last saw you,” Speaker Joseph Cannon wrote to President Theodore Roosevelt in a 1903 letter.
In other words, it isn’t the first time American politicians have been at loggerheads and it won’t be the last.