The bipartisan approach outlined today in the NYT on deficit reduction seems to me to be exactly the right paradigm for practical reform. Politically, the only solution to the deficit will be concessions from both sides. If possible, those concessions should be as beneficial as possible to the existing economy, and as fair as possible. Taxing carbon and reining in entitlements for the wealthy seem eminently sensible things to do regardless of their positive impact on fiscal balance. If you're going to raise taxes - and we may have no politically viable alternative - the following seems a good approach to me:
To make up the balance we propose to increase revenues not by raising income tax rates but by dealing with some of the flaws in the current tax system.
The major reform would be to broaden and simplify the tax base by turning almost all itemized deductions into 15 percent credits against taxes. We would also place a cap on how much of employer-paid health insurance premiums could be excluded from taxes.
The spending side is also shrewd:
On spending, we would put a hard cap on all appropriations that freezes spending at fiscal 2008 levels. This would allow one federal program's financing to increase only if another program's budget were cut. We also propose accelerating the increase in the retirement age to 67 from 66, improving the way Social Security benefits are indexed for inflation and making other modest adjustments in the major entitlement programs.
All of this, alas, is still petty stuff compared to the looming fiscal crisis of boomer retirement. But it's a model for a bipartisan solution for the bigger challenge: keeping tax rates unchanged, freezing spending, reforming entitlements to focus them on the needy. Yes, it's high-minded. But it's surely better than another round of acrimonious rhetoric about "slashing spending" or "raising taxes." Reducing debt means compromise. This is a decent one.