The president could break the logjam in Washington and move toward a solution of all budgetary problems if he merely asked every American to contribute 2 cents.
No, this isn’t some far-fetched science-fiction scheme, like beating the debt ceiling by minting two platinum coins valued at a trillion dollars each.
It’s a practical, patriotic, down-to-earth solution that might enable Barack Obama to assemble a bipartisan coalition, finally transcending the petty bickering he pledged to end when he first campaigned for president five years ago.
Americans have begun to realize that the nation’s crushing debt threatens their own economic survival. In a moment of anxiety and crisis, a majority of the public might embrace the fairness and necessity of demanding that all Americans who pay taxes chip in 2 cents on the dollar more, while everyone who receives government payments of any kind accepts 2 cents on the dollar less.
If nothing else, this comprehensive and comprehensible idea could move our leaders past the present paralysis. For President Obama, refusing to negotiate over the debt ceiling hardly represents the sort of cooperative, consensus leadership he once promised to deliver. But in the midst of the January 14th press conference challenging the House to a new confrontation, he actually hinted at the right approach to leading the country beyond the risky game of chicken that’s preoccupying both sides.
The president said then that the American people “want us to get our books in order in a balanced way, where everybody pulls their weight, everyone does their part. That’s what I want, as well.”
The problem is that the fiscal-cliff fight and all previous budgetary battles featured the president explicitly exempting 98 percent of Americans from making any sacrifice for the sake of deficit reduction. He repeatedly (and effectively) insisted that he wanted to protect everyone except the highest income taxpayers from either tax increases or benefit cuts. This approach achieves almost nothing in terms of balancing the nation’s account books, with the tax increases on top earners imposed this year yielding at most a 6 percent reduction in annual deficits that still exceed $1 trillion a year.
If the president called instead for a genuine program of shared sacrifice, he could rally support from moderates and pragmatic conservatives and make serious progress in reducing the devastating deficit. With no other alterations in projected federal spending, an increase in taxes of 2 percent across the board (yes, including corporations), combined with a cut in spending and benefits that also subtracted 2 cents on the dollar, would yield deficit reduction of $400 billion this year—four times as much as the mandated sequestration cuts scheduled for March, and nearly seven times as much as the combined tax hikes in the fiscal-cliff deal. In fact, if applied for a full decade, the 2 cent fix would easily top the $4 trillion in total deficit reduction the president declared as his ultimate, visionary goal. It would move the country nearly all the way back to the normal, post-war spending-to-revenue ratios that applied as recently as 2007—19.5 to 18.3 percent of GDP. This compares to the unprecedented imbalance of last year, which saw spending at 24.3 percent and revenue at just 15.8.