Steve Forbes argues in the latest Forbes magazine that a deal to solve the fiscal cliff dilemma depends on one key figure.
Most Democrats and Republicans would quickly sign on to a 1986-type of tax compromise. Back then Democrats wanted to attack tax shelters and Republicans wanted to reduce tax rates. So they did both. Shelters were swept away. There were only two income tax rates, and the top levy was cut from 50% to 28%.
We could do the same thing now: Cap or reduce deductions for high-income earners and preserve or reduce rates. The “rich” would pay more, but the economy would be helped.
But President Obama is after revenge. He’s still smarting from having to extend the Bush tax rates for two years after his party took a shellacking in the 2010 congressional elections. Moreover, he has a deep personal antipathy to people of means, particularly if they’re from the business community. He just wants to stick it to them, even if it harms the economy.
Obama Democrats argue that the President only wants to restore the top rates that reigned during the Clinton presidency, which was a prosperous time. If Democrats want Clinton-type income tax rates, then let’s also have the other critical facets of those years. The oppressive ObamaCare of that time was HillaryCare, which was never enacted. If we want to re-create the Clinton economy, then we have to repeal ObamaCare. Are Democrats willing to do that?
Federal spending as a proportion of the economy was smaller in those days. That would mean budget cuts now of around $500 billion—not spread over ten years, but right now. How likely is that?
