You can marvel at a Republican House majority so blind to math and demography that it regards any marginal rate hike as unacceptable, no matter how small a sliver of high earners it affects.
And you can lament the fact that Americans under 40 haven’t woken up to how they’ve been sold out (again) by these arrangements.
But we are where we are. So the only practical question now is, how do we make the next cliffs count? My answer is what I’ll call “cap and swap.”
Remember what we’re trying to accomplish. It’s not just about “saving the safety net,” as the left claims, or salvaging “freedom,” as the right argues. It’s not even, ultimately, about solvency; that’s the ante. Our goal should be a fiscal framework that bolsters U.S. competitiveness through investments in infrastructure and R&D, renews upward mobility through major investments in early childhood and promotes the innovation and growth that (in the end) makes redistribution in the name of equal opportunity and economic security possible. Oh, and the deal should tame our debt and deficits, too.
Given these goals and the coming cliffs, what should Washington do now?
On spending, the truth is that GOP favorites like raising the Medicare eligibility age or adopting a “chained CPI” for Social Security shave only pennies off the future costs of these programs. Even Paul Ryan’s “tough” budget didn’t touch Medicare for a decade, and left Social Security off the table entirely. Beyond this, Republicans haven’t identified anything remotely equal to the savings we need. And because many liberals haven’t thought through the long-term budget implications, or wrongly assume that taxes can rise indefinitely or that the Pentagon can be shrunk to something less than a triangle, they resist sensible steps to slow the growth of Social Security and Medicare, not realizing that this course will assure before long that there isn’t any new money to spend on (say) poor children.
I say, if the president and Republicans want to restrain entitlement growth, but neither wants to offer specifics, let them come together around a new aggregate annual cap on entitlement spending. If Social Security, Medicare and Medicaid are together slated to grow by 6.7 percent a year for the next decade, enact a law saying they can only grow by, say, 5 percent (saving $400 billion in year ten). The details can be worked out later. A sequester that kicks in if the target is exceeded (and which can be waived only by a two thirds vote) lets the Congressional Budget Office score the savings. Add a new “65/65” rule that if programs serving people over 65 comprise more than 65 percent of non-defense, non-interest spending (my rough estimate pegs them at around 55 percent today), a further consequence is triggered (if I were king, when this threshold was breached, the votes of Americans aged 18 to 40 would be counted twice for a decade).