Can anything anything impel Congress to act?
We know this new king of do-nothing Congresses wont begin to get the nations taxes and spending in order before the November election. But are we hopelessly naïve to think that the threat of higher taxes and across-the-board spending cuts could scare lawmakers into coalescing around a grand bargain in December?
Probably so. The country got a glimpse of how difficult it will be last week, when the Senate Finance Committee embarked on tax reform by putting its microscope on 75 special-interest tax breaks. But in the end, the committee members came across like parents who cant say no to their kids watching just one more Olympic event before bed.
The Washington Posts Lori Montgomery ticked off the special provisions that senators of both parties couldnt bring themselves to ax. An accelerated write-off for NASCAR track owners. A credit for a StarKist tuna cannery in American Samoa. A rum-tax rebate for Puerto Rico and the Virgin Islands that provides millions to one of the worlds largest distillers.
Sen. Max Baucus committee did get rid of some, and even that, sadly, was practically historic. But it left several dozen alone, costing taxpayers about $40 billion next year. Not a good sign for those of us who want to see the tax code simplified as part of a far-reaching compromise to avoid driving off the so-called fiscal cliff Jan. 1.
If Congress does nothing, taxes will rise on everyone and blunt cuts will be made to the federal budget. And while our unsustainable deficits mean tax revenues need to increase and spending needs to drop in the long run, most economists believe the timing and the indiscriminate nature could send the country into another recession.
By law, the only way to avoid this scenario is for Congress to agree to a long-term debt-reduction deal. Which surprise, surprise brings us back to the Simpson-Bowles plan, or something like it. When the bipartisan commission led by Charlottes Erskine Bowles and former Wyoming Sen. Alan Simpson unveiled a deficit-reduction plan in November 2010, we said its approach was spot-on. But it spooked both parties. President Obama failed to run with his own commissions recommendations.
So we wasted two years. Now Congress needs to embrace something similar or risk sending the economy into a nosedive.
The Simpson-Bowles approach included about $3 of spending cuts for every $1 of new revenue. Much of its new revenue came from eliminating many of the loopholes, credits and deductions that make the U.S. tax code so complex. Some of those deductions are widely popular and serve a sound purpose. Many dont. Both Obama and Republican Mitt Romney say they want tax reform. Neither, though, backs a proposal that would cut the deficit in a dramatic, fair and balanced way.
Congress needs to show some spine, eliminate those loopholes that can no longer be justified as anything but a special interest gift, and apply the money to deficit reduction. Even if that means no more rum-tax rebate in the Virgin Islands.