Are the Republicans allowing President Obama to define the issues in the fiscal-cliff debate? President Obama desperately would like to keep the focus on taxes when the most severe problem is spending. It must be emphasized that you can tax the top 2 percent at 100 percent and you would still have a gigantic fiscal problem.
Economy & Budget
According to Wikipedia:
“Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone … It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the ‘cost’ (as a lost benefit) of the forgone products after making a choice. Opportunity cost is a key concept in economics, and has been described as expressing ‘the basic relationship between scarcity and choice.’ ”
As my friend Steve Bell, of the Bipartisan Policy Center, reminded me yesterday, the opportunity costs of not doing a “big” deal that includes fundamental entitlement and tax reform in the context of the fiscal cliff are enormous.
The First World War was begun because of incompetent statesmanship by leaders who did not want a war but blundered into one. The fiscal-cliff fiasco can only happen if leaders in Washington continue the same mistakes that have plagued the capital for far too long and blunder into an economic crash they do not want.
Given the limited time and momentous issues surrounding the fiscal-cliff discussions, I propose that first, Congress enact a 30- to 45-day cooling-off "punt"; second, that Senate leaders be brought into the center of the fiscal-cliff talks; and third, that a major round of fiscal-cliff talks be conducted in public and broadcast live on C-SPAN.
The very notion that we can borrow our way out of the recession seems to be the latest diversion these days, but it is bound to have unintended consequences.
For starters, it sends the wrong message to consumers and businesses in our economy that are already leveraged to the hilt in debt. It sends the message, whether intended or not, that spending profligately beyond our means will ultimately save us from the results of having lived beyond all measure of financial prudence as individuals and as a nation.
The International Monetary Fund has jumped into the so-called “fiscal cliff” crisis in the United States with Managing Director Christine LaGarde weighing in on the situation this past weekend, saying, “The best way to go forward is to have a balanced approach that takes into account both increasing the revenue, which means raising tax or creating new sources of revenue, and cutting spending as well.”
Speaker Boehner should immediately take Ms. LaGarde up on her challenge by eliminating the $100 billion line of credit that the U.S. Treasury has given LaGarde’s IMF.
The arguments for entitlements are usually moral arguments, never economic arguments. No one thinks that it’s good for our economy, even the most reality-phobic Keynesian. It is never “this will work and we’ll all prosper,” but always presented to us in moral guise: “Don’t throw Grammaw off the cliff!”
Perhaps it is time for Congress to zero out the budget of the Bureau of
Labor Statistics, an agency of the Department of Labor whose data is so
important to financial markets that figuring out how to protect it
against its early release has become a major debate in the halls of the
Frances Perkins Building.
Why? Their work has become increasingly irrelevant.
Congress has a responsibility to ensure that taxpayers’ money is spent prudently. It also has a fiduciary responsibility to future generations to preserve the country’s assets and to pass on a financially sound government and society. It would be fiscally irresponsible for Congress to authorize spending money today for current consumption that it must borrow. It should never borrow money unless it is creating infrastructure and investment that will benefit future generations. Each generation of Americans must pay for its current government consumption. It should not create consumption liabilities that future generations must repay.
I believe that everyone in public office, and any serious opinion writer, has some obligation to move beyond the talking points and offer some concrete proposal for the good of the country. Here is my proposal for the grand bargain that will address revenue, entitlements and defense spending based on my experience working for and with Democratic leaders and being involved in similar deals. I do not expect this note to generate many comments because I am not doing the ritual partisan talking points that both sides dispense, but I would urge any who do comment to write what YOU would offer that YOU don't like, as I am doing here by suggesting a few things that I do not like.
The Kinks song "Lola" tells the story of "a mixed up muddled up shook up world," and that is how any Capitol Hill observer must feel with Washington, D.C., Republicans openly talking about agreeing to as much as $1.2 trillion in new taxes over the course of the next 10 years.