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Where Obama is in this picture is anything but clear. He appointed the Simpson-Bowles commission, but he has yet to expend one erg of energy to help get it implemented.
In fact, he has stipulated that retirement benefits shouldn’t be “slashed” — even though the commission actually proposed gradually extending the retirement age to 69 in 2075.
The commission also proposed lifting the level of income subject to payroll taxes above its current $106,000 level.
It’s a version of an idea floated by one of my favorite idea-activists, Rick Swartz — applying the principles of tax reform to Social Security by “broadening the base and lowering the rates,” i.e. taxing all income but cutting tax rates to encourage hiring.
Entitlement and tax reform are both going to encounter fierce resistance from entrenched interests, starting with AARP and extending to Grover Norquist’s Americans for Tax Reform, which is currently attacking Coburn, of all people, for proposing to reduce tax breaks on business.
If General Electric can make enormous profits and pay no taxes whatsoever — as The New York Times demonstrated last weekend — there is obviously a crying need for tax reform.
There also needs to be at least a reduction in defacto subsidies to industries like housing and health care — also ethanol and oil — that distort investment decisions.
Special interests will fight to defend them. But tax reform has happened before — in 1986. The interests fought it, but it had President Ronald Reagan behind it, plus Senate Republicans plus House Democrats.
It didn’t take a crisis to enact tax reform in 1986, but usually it does take one to compel difficult action. The imminent expiration of the federal debt ceiling could be a driving force for action on the debt.
Of the other bipartisan grand bargains that ought to be on the agenda, the one most possible this year would be on education reform, but at least there ought to be constructive debate on energy, immigration, health reform and infrastructure investment.
Republicans and Democrats have this incentive to do the right thing: the public does not trust either party. But more important, polls show that most people think that America’s best days are behind it. Without the bargains, they will be.