I know what you’re thinking: An entitlement cap is a charade without policies designed to stay within it. But it’s the most constructive charade we could get this year. Caps on discretionary spending have worked pretty well. And an entitlement cap embraced by both sides could put fresh energy into bipartisan efforts to make the health-care system more efficient.
That’s the “cap.” On taxes, we need the “swap.” President Obama must insist on real revenue in the next cliff endgame — you can’t retire the boomers and renew America with taxes never topping 19 percent of GDP. But with marginal rates now headed to the mid-50s in high tax states like California and New York, Obama is about to lose his support among the politically vocal lower-upper class. In the end, his drive to tax the top even further via new limits on deductions won’t get him nearly the revenue the country needs.
A senior fellow at the Center for American Progress and the host of the new podcast “This...Is Interesting,” Miller writes a weekly column for The Post.
That means the jig is up: The welfare state in an aging United States requires higher taxes on the middle class, phased in once jobs and growth pick back up.
But the new taxes shouldn’t be income taxes. Now is the time to introduce a small carbon, VAT or financial transactions tax — or, preferably, all three. Small rates can rise over time. Use these new taxes in part to buy down (and eventually eliminate) corporate income and payroll taxes. (For every two dollars in new taxes from these sources, for example, one dollar in corporate income and payroll taxes could be cut).
If this package seems to tilt right, Obama could toss a much-needed minimum wage increase into the mix, and even a new marginal rate of 50 percent for earnings above, say, $5 million a year — with the proceeds dedicated to a trust fund to bring great teachers to poor schools.
Think of these as the potential contours of a Really Grand Bargain. The numbers need to be run. The “win” for both sides needs to be detailed (a task beyond one column). But you see the political and policy molecule I’m trying to construct.
If we want to turn our endless cliffs into a big bang for economic growth and social justice, “cap and swap” may be the ticket. I’m not saying its what a benevolent dictator (or a gutsy presidential candidate) would do. But given today’s screwball politics, and the chance that the debt limit could make folks aim high in one last ecstatic fever of constructive dysfunction, it’s worth a try. Somewhere in the capitol, a “gang of six” willing to think imaginatively could get this conversation, or something like it, started tomorrow.
Matt Miller is a senior fellow at the Center for American Progress and co-host of public radio’s “Left, Right & Center.” His e-mail address is firstname.lastname@example.org.