opinion from Bloomberg News
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In most polls these days, Americans cite the lack of jobs as the No. 1 problem.
President Barack Obama and Republican challenger Mitt Romney claim to know how to fix it. But win or lose, neither is likely to see his ideas fully put into practice.
Elections no longer determine which party’s economic vision prevails, except in the rare occasion when one party controls the White House and both chambers of Congress.
Winners are unable to push through legislation to enact their policies because the losing party does everything possible to block it. The culture of Washington has devolved from one in which the loyal opposition prevents legislative or regulatory excess to one in which the out-of-power party uses the filibuster and 24-hour cable television to prevent the president from governing.
There is a way out. It would almost certainly lead to more jobs. And it can be reduced to two words: Compromise now. Find a way before November’s elections to prevent $600 billion of tax increases and spending cuts totaling about 4% of gross domestic product from slamming the economy on Jan. 1. We realize the poisoned atmosphere of an election season makes this seem impossible. But if elections no longer settle our differences, why wait?
Employers understand the new Washington dynamic better than most. They have zero expectations that lawmakers will find common ground before November, or that a lame-duck Congress and possibly a defeated president would strike a grand bargain.
Romney, for example, has given no indication that he would turn his back on Tea Party hard-liners to compromise with Democrats over raising taxes. Yet numerous studies, panels and commissions, including the one led by Alan Simpson, the Republican former senator, and Erskine Bowles, the a White House chief of staff under Democrat Bill Clinton, have concluded that higher taxes must be part of any debt-reduction package.
Nor has Obama shown great leadership on budget issues. He favors higher taxes on the wealthy, which wouldn’t come close to solving the fiscal problem. Worse, Obama snubbed his own Simpson-Bowles commission. Since the panel offered its blueprint in December 2010, it has won numerous converts, yet the president never grabbed the opportunity to push for its enactment.
No wonder corporate executives have turned skittish. Instead of creating jobs, they are hoarding cash, canceling plans to buy equipment or build plants, and postponing new products. The economic downturn that everyone predicts if the fiscal hammer comes down is already happening. Companies take no solace in the oft-mentioned path around January’s landmines — extending the expiration dates of the 2001 and 2003 tax cuts passed under President George W. Bush and postponing $100 billion in automatic spending reductions.
That “would be a very bad outcome,” as Federal Reserve Chairman Ben S. Bernanke told senators in July.
For their part, the Republican-controlled House and the Democratic-controlled Senate are adopting measures that enshrine their views on the Bush tax cuts. The Senate would raise taxes on wealthier Americans and the House would lower everyone’s taxes. The votes are phony; neither chamber has any intention of trying to find common ground with the other.
Yesterday (July 30), House and Senate leaders took the tiniest of baby steps toward fiscal sanity by agreeing to hold votes in September to fund the government at current levels for six more months. This is less a show of bravery and more an act of self-defense: It prevents a government shutdown and layoff notices from hitting mailboxes just before Election Day.
What can we do? While U.S. lawmakers are in their districts throughout August, or while Obama and Romney scour the battleground states for supporters, voters should demand that the candidates show how they might compromise with the other side to stop us from barreling over that cliff.
A sensible plan could take many forms, but here’s a start: Increase federal spending on public works, jobs programs and education over the next two years (tops on the Democratic wish list) while making deep cuts over the next decade. Require well-to-do Social Security and Medicare recipients to pay more for their benefits. Lower the top income-tax rates on individuals and corporations from 35% to 28% (a Republican favorite) while closing hundreds of loopholes and limiting tax breaks for mortgages and charitable contributions. Treat capital gains and dividends as ordinary income. Raise the gasoline tax by 15 cents. Altogether, this would lower the national debt by about $4 trillion over 10 years.
If it sounds familiar, that’s because it closely resembles the Simpson-Bowles plan. The document already contains so many well thought out left-right compromises, it’s hard to improve. In truth, the parties aren’t far apart, in dollars, on tax cuts. In the legislation that passed the Senate on July 25, the two sides differed by about $29 billion, or 1.2% of projected receipts. That amount is hardly worth arguing over in light of the $15.2 trillion national debt.
The details matter less than voters’ demands that each candidate produce a compromise plan that could muster 60 Senate votes, enough to break a filibuster.
We already know Obama, Romney and Congress are capable of continuing Washington’s gridlock. Wouldn’t it be inspiring if they showed voters how they would end it?