The Growing Consensus on a Fiscal Cliff Solution
Posted at 12:45 p.m. on Nov. 9, 2012
Greg Ip notes that the significant commentary around the “fiscal cliff” is overlooking what appears to be an emerging consensus among lawmakers on how to move forward.
“Presidents choose their words carefully. So when Barack Obama talked of ’tax reform’ but not ‘tax rates’ in his acceptance speech early Wednesday, he was presumably sending a signal. And it was similarly significant that later that day John Boehner repeatedly stated his opposition to higher tax ‘rates’ rather than tax revenue. Within those two carefully crafted statements lies the nucleus of a deal: raising tax revenue through some means other than higher tax rates.”
“Thus far, Mr Obama has equated that with allowing the top two income tax brackets to return to their pre-2001 levels. But there is an alternative route to the same goal that does not require higher rates, and it comes courtesy of Mitt Romney. Recall that when asked how he would pay for a 20% cut to marginal rates, he proposed a cap on deductions… it’s quite possible that the two could start out small with more modest caps on deductions and cuts to discretionary spending with cosmetic trimming of health care entitlements – enough to justify extending the lower tax rates for a year and delaying the sequester of automatic spending cuts. It would be a down payment on a more ambitious plan next year.”