My Grand Fiscal Cliff Bargain
You can find it here, and you can create your own as well. A few notes on the plan I crafted:
- I would have been willing to extend all tax cuts but I wasn’t given that option. So instead, I made sure to extend tax cuts that were below $200,000 per individual and $250,000 per household. I did demand that state and local government employees join and pay payroll taxes—I have to admit that I am shocked that they didn’t already—and I also imposed a 5% VAT and a carbon tax (though not quite the carbon tax I wanted to impose). I think that a VAT has the value of being the least economically disruptive tax possible, while at the same time, being one of the best at raising gobs of revenue, so I opted for it; as a policy matter, I would want the country to move away from taxing income and move towards taxing consumption instead, and showing how that could be done with a VAT might be very useful politically. Obviously, when it came to raising revenue, I did all I could in order to do it by closing loopholes and deductions in order to flatten and simplify the tax system.
- I didn’t find too much in annually appropriated spending that I felt that I could cut, so that category accounts for the least amount of savings.
- Cuts to entitlements and benefits provided more fertile ground for savings, so I was able to raise $500 billion from that. However, given that the vast majority of savings come from revenue, the hands of those who in the real world are arguing for revenue increases in order to balance the budget is strengthened. A lot of those revenue increases may come from closing loopholes or deductions, but going through the exercise, it becomes clear why a lot of them may come through new taxes as well.
- The above having been written, we can settle for a much smaller surplus or a relatively tiny deficit if we raise no taxes at all. Under my plan, we have a $477 billion projected surplus by 2020. If I eliminated all of the tax increases I could under the exercise, and kept the loophole and deduction closures, we would have a mere $3 billion deficit by 2020, which we could entirely live with and which seems utterly fantastic when compared to the current fiscal picture. Miniscule cuts in defense could likely bring us into surplus. (Again, note that the exercise does not allow me to extend Bush era tax cuts for all income groups.)