I hope the President starts negotiations over a “grand bargain” for deficit reduction by aiming high. After all, he won the election. And if the past four years has proven anything it’s that the White House should not begin with a compromise.The Simpson-Bowles deficit deal, and the grand bargain deal should NOT be the opening gambits to start a discussion on. They should never have been a part of the discussion to begin with, but advocates of Simpson-Bowles are doing a campaign to resurrect it through the "Fix The Debt" coalition, and reaching out to lawmakers and businesses to push for so-called reform of Social Security and Medicare.
Robert Reich proposes what the President should start out with in negotiations:
1. Raise the taxes on the rich by more than the top marginal rate on the wealthy during the Clinton years.And Reich points out that this can be done without raising taxes on the middle class, cutting benefits in Social Security or Medicare or Medicaid, or reducing education spending. As anyone knows in negotiations, you should never start out low or from a weak position.
2. A 2% surtax on the wealth of the richest one-half of the 1 percent that would bring in $750 billion over a decade. Also, a one-half of 1 percent tax on financial transactions brings in $250 billion.
With these two points, half of the deficit will be gone over the next decade.
3. Raise capital gains rate to match rate on income and cap mortgage interest deduction at $12,000 per year. That would bring in an additional $1 trillion over the next decade, bringing the total to $3 trillion in revenue.
4. Eliminate special sweetheart deals for Wall Street, oil, gas, pharma, agriculture, and military contractors.
5. End Bush tax cuts on incomes above $250,000 and $1 million, and we've achieved $4 trillion in revenue over the next decade.
The grand bargain deal last year is such a weak position. The President should not be beginning from there. He has the upper hand. People supported his campaign and his pledge to raise taxes on the wealthy. Thus the President should aim high.