Shaping the future with today’s choices.
I have never had the slightest illusion that a centrist writing in this blogosphere would receive anything remotely resembling a civil reception. That was certainly true with the comments I received when I supported the deficit reduction proposals of the two co-chairs of the president's commission. I don't expect this time to be any different.
But just to be consistent, I want to mention that the Bipartisan Policy Center released a task force report on debt and deficit reduction. The report is sensible, fair, and far-reaching. In its fundamentals, this report parallels the report of the co-chairs of the president's commission, but it differs in many of its details -- many of which I prefer over the president's commission. I hope the president supports both of these efforts and moves to take over this debate.
The Bipartisan Policy Center report makes a major recommendation that the president should support immediately. It recommends a payroll tax holiday for 2011, which CBO estimates will create at least 2.5 million jobs. I think we need more stimulus, but the odds are 0% that we will get more in any conventional way. A payroll tax holiday puts more money in the hands of families that will spend it and reduces the cost of employment. I think this is a winner and should be pursued now, but I am sure I will be told that only "corporate scum" (one of many things I was called) would think this was worth considering.
In a different time, this task force report and that of the President's budget commission would be seen as progressive positions, but they obviously are not now. But consider: public debt is now 60% of GDP, moving to about 100% in 15 years, and to much higher levels after that. The (net) interest we pay is now about 1 3/4 % of GDP: that triples over the next 15 years. At that point, we will spend all of our revenues on the big entitlements and interest, leaving nothing for everything else. Turning these trends around before they take us to our next economic crisis, and creating space for a strong and capable public sector, might be considered reasonable progressive goals. In that vein, anyone interested in actual policy ought to look at the tax and revenue proposals of both reports:
Both reports follow the long-term progressive direction of broadening the tax base and lowering marginal rates.
Both reports reduce the number of separate tax rates and retain a progressive rate structure.
Both reports lower corporate tax rates. This will be controversial with progressives, but since at least 50% of all defined contribution pension plans -- which most Americans have today -- are in equities, this is a tax cut for middle class Americans.
Both reports recommend cutting the most wasteful and unfair tax deductions (tax expenditures). Take the mortgage deduction. It functions in a way that is simply unfair to middle class families. The blunt truth is that the people who most need the benefits of the mortgage interest deduction don't get them. If the mortgage deduction were eliminated completely (which these proposals do not recommend), by far the largest impact would be on the top 20% of all incomes, and within this category, by far the biggest effect is on the top 1%. There would be close to no effect on the bottom 60% of all incomes. Why dismiss changing this out of hand?
Both reports make provisions for low income tax payers simpler and more progressive.
Both reports introduce a new tax that is very much like a value added tax. We are going to need a new source of tax revenue, and progressives ought very much to want a carefully defined VAT.
There are any number of issues in the proposals as complicated as these that people can reasonably debate about. But taken as a whole, these tax and revenue proposals are ones progressives should see as a big win. On the other hand, everyone might feel better snatching defeat from the jaws of victory by refusing to consort with the other side.
Which brings me to an observation about the reception to my previous blog, and I am sure to this one as well. I was not surprised, considering the neighborhood, at the 100% disagreement. Nor did the tone bother me too much, again considering the neighborhood. But what actually was interesting was the fact that virtually every response directly implied that any position differing much from the received conventional progressive wisdom should not be part of a progressive website. In fact, they should be thrown out.
This is consistent with almost all social science research. As our politics polarize -- as is happening -- Americans on the left and right are less and less interested in reading, thinking about, or discussing any points of view that are different than their own. This is very clear in how Americans use new media, and perhaps why they have turned away from older media such as newspapers. So everyone here is conforming to an established pattern.
This is also consistent with the clear findings that polarization begets polarization. We officially began our Next American Economy project Tuesday with a breakfast with Bill Bishop, author of "The Big Sort", as the guest. I won't describe his thinking here, but one of his points is that "like minded groups grow more extreme over time in the direction of the majority view... Heterogeneous communities restrain group excesses; homogeneous communities march toward the extremes."
That's America today. Both ends of the political spectrum marching toward the extreme. Both resolutely ignoring thought that deviates from their ideologies. Both increasingly defining those ideologies in more extreme and narrow ways. Both defining the other side as "the other" and the enemy. These are the politics of adolescents in a time that requires grownups.
Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team.