A "grand bargain" to avert the fiscal cliff and defuse our growing debt bomb must include tax increases and spending cuts. Other nations successfully tackling similar problems have done it mostly on spending. That spending is the real problem is clear from the fact that taxes couldn't be raised high enough to close the gap.
Revenues can best be increased through capping deductions. This would hit mostly the rich while avoiding the politically charged issue of raising tax rates. Republicans seem open to it; yet President Barack Obama and the Democrats are not. Instead, they seem positively obsessed with raising the top rate back to 39.6 percent, pursuing this as Ahab pursued his great white whale.
Both sides are blameworthy, pushing narrow partisan interests while convinced of rectitude. But Democrats are more willing to go over the cliff. They figure to blame Republicans, and they see this as a white whale trap. If there's no deal, all tax rates automatically will rise Jan. 1. Republicans wouldn't have the votes to re-reduce them for the rich, while Democrats can legislate reductions for the non-rich.
Because they think they have the upper hand, Democrats aren't being serious about spending cuts, even reducing what they had previously offered Republicans in trade for higher revenues. The cuts on offer now are paltry and mostly smoke and mirrors. It is no wonder Republicans refuse.
Conventional wisdom says going over the cliff won't be catastrophic because the parties then will scramble to a deal. However, actually letting this happen would be terrible for the economy, showing our political system to be even more dysfunctional. Remember, the fiscal cliff was designed intentionally, to force the parties to compromise. Why expect a deal without the deadline? If the sky does not fall straight away (but only in slow motion), there will be even less impetus for a grand bargain. Democrats now will have bagged their white whale; tax rates will rise for the rich, leaving no bargaining chips to get anything done on spending.
America is the Pequod. Democrats will party on deck while the vessel takes on water. Call me Ishmael.
FRANK S. ROBINSON
Albany