Fiscal Battle: More of a truce than peace

I watched enough Saturday morning cartoons to know that it could be done.  Time and time again some hapless cartoon character finds himself running off the edge of a cliff only to start back peddling midair and return again to terra firma and wipe the sweat from his brow.  “Whew.”

That describes where we are today, does it not?  You can draw your own conclusions, but cartoon reality is as sophisticated as anything going on in Washington today and, hey! trust what you just witnessed!

I believe an opportunity for real tax reform — or at least a practical discussion of it — might have been missed, however.  It seems to me that the White House had an opportunity to propose a tax reform plan as a part of the Fiscal Cliff negotiations.  Tell the GOP congress, for example, that they can either consider at reform now as a part of a long-term solution or let the Bush tax cuts expire on schedule.  Let the chips fall where they may.  There might have been some power in that position.

Most Americans would have placed the blame exactly where it belongs:  Squarely on the shoulders of the GOP.  And until we get out of cycles driven by failed conservative principles, we cannot expect to enact the larger reforms necessary to restore vitality to the American economy.

In time, it would seem that we need to restore taxes to levels more in line with the Clinton years anyway, but the problem is we really cannot afford to implement tax increases on middle-income earners now.  These are the people who spend the majority of their earnings out of necessity.  That spending is crucial to economic recovery.  Reducing that spending power is a mistake in the current economic situation.

Prior to the Bush tax cuts, funding was adequate.  The Bush tax cuts were part of an overall “starve the beast” strategy implemented in an era when the beast was allowed to grow on healthy diet of deficits.  The so-called spending problem was matched by a funding problem, especially as it involved unfunded programs like a few poorly conceived wars, expansion of the national security, and those tax cuts.

Eventually the formerly robust state of macroeconomic and fiscal harmony should be the ultimate goal of government policy makers, but it is hard to see how we will get there with a country so dismally misinformed and divided about tax policy and economics.  Rather than return to the pre-1930s America, we should be looking to restore the more principled policies of the 1990s.

The White House had an opportunity to roll that out.  Of course it would have to have been a long term plan — which is all but impossible in politically divided and impatient America today — but it would have been nice to see ideas reach beyond a time horizon measured in weeks for a change.

Unfortunately, those of use nostalgic for the civil pragmatism of the past, might have to settle for cartoon antics over political ones.

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