I hope the President
starts negotiations over a “grand bargain” for deficit reduction by
aiming high. After all, he won the election. And if the past four years
has proven anything it’s that the White House should not begin with a
Assuming the goal is $4 trillion of deficit
reduction over the next decade (that’s the consensus of the
Simpson-Bowles commission, the Congressional Budget Office, and most
independent analysts), here’s what the President should propose:
First, raise taxes on the rich – and by more than
the highest marginal rate under Bill Clinton or even a 30 percent
(so-called Buffett Rule) minimum rate on millionaires. Remember:
America’s top earners are now wealthier than they’ve ever been, and
they’re taking home a larger share of total income and wealth than top
earners have received in over 80 years.
Why not go back sixty years when Americans earning
over $1 million in today’s dollars paid 55.2 percent of it in income
taxes, after taking all deductions and credits? If they were taxed at
that rate now, they’d pay at least $80 billion more annually — which
would reduce the budget deficit by about $1 trillion over the next
decade. That’s a quarter of the $4 trillion in deficit reduction right
A 2% surtax on the wealth of the richest one-half
of 1 percent would bring in another $750 billion over the decade. A
one-half of 1 percent tax on financial transactions would bring in an
additional $250 billion.
Add this up and we get $2 trillion over ten years — half of the deficit-reduction goal.
Raise the capital gains rate to match the rate on
ordinary income and cap the mortgage interest deduction at $12,000 a
year, and that’s another $1 trillion over ten years. So now we’re up to
$3 trillion in additional revenue.
Eliminate special tax preferences for oil and gas,
price supports for big agriculture, tax breaks and research subsidies
for Big Pharma, unnecessary weapons systems for military contractors,
and indirect subsidies to the biggest banks on Wall Street, and we’re
End the Bush tax cuts on incomes between $250,000 and $1 million, and — bingo — we made it: $4 trillion over 10 years.
And we haven’t had to raise taxes on America’s
beleaguered middle class, cut Social Security or Medicare and Medicaid,
reduce spending on education or infrastructure, or cut programs for the
Mr. President, I’d recommend this as your opening
bid. With enough luck and pluck, maybe even your closing bid. And if
enough Americans are behind you, it could even be the final deal.