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Posted at 11:45 AM ET, 11/21/2012

Time for our government to de-leverage

Ed makes an interesting point in his post this morning: Entitlements are more of the problem in any grand bargain on the deficit because that’s where the money has to come from — at least with the current discussion. Starting with Simpson-Bowles and continuing until today, the assumption has been made that for every dollar in tax increases, there will have to be eight or so dollars in cuts. Ed argues that despite the president’s signal last year in the debt-ceiling talks he might consider such an approach, Democratic congressional leaders have been cool (or cold) to the idea.

Like most political debates, the current one over deficit reduction is taking place with very little information or input from the American people. They are faced seemingly with a series of bad choices: raise taxes, cut Medicare, or go over a cliff into a new recession. Perhaps this is the happy idiot in me speaking, but I think there is a different way to frame this discussion.

After years of economic bubbles in housing and finance, after years of governments (mostly Republican) telling us we could have the guns of war and the butter of tax cuts, we have come to a reckoning. The housing and financial bubble have popped, and the de-leveraging has brought our economy to its knees. But a recovery is beginning to emerge from the rubble. Now it is time for our government to de-leverage in a measured and balanced way that promotes not just fiscal stability but economic growth.

Someone needs to explain to the American people the higher value in a debt-reduction deal. It isn’t about balancing a national spreadsheet, it’s about putting us back on a road to prosperity.  It needs to be reframed not as a fight between rich people’s tax cuts and the middle-class’ entitlements, but as an opportunity to grow the economy for all.

Entitlement reform should be sold in the same way as the tax increases. Just as the wealthier can pay a little more for their ultimate benefit (more confident capital markets and a more stable investment environment) so, too, the wealthier can accept a little less in social security and Medicare. We can have, as others have suggested, a sliding scale of age eligibility for entitlements based on a recipient’s assets. The more money they have, the later their eligibility.

The person with the opportunity to reframe the debate is, of course, the president. Maybe he could get more excited about such an effort if he remembered that the Republicans are temporarily stunned and more easily rolled, and the American people are willing to listen to what he has to say once again. It’s time to give them reasons to believe in the possibilities of a better future, not just an austere one.

By  |  11:45 AM ET, 11/21/2012

 
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