If President Obama and Speaker Boehner truly wish to avoid the fiscal cliff, perhaps it is time to bring the two people together who actually have resolved a similar crisis in a truly bi-partisan manner, former President Bill Clinton and former President George W. Bush.
Take a look at potential tax rates under the proposed 2013 budget.
The two former presidents' records on taxation and spending records are today viewed from greatly different perspectives. President Clinton’s balanced budgets, achieved under periods of outstanding economic growth, are revered for their accomplishments in Welfare reform, restoring solvency to Medicare, reducing the growth of federal spending, and of course, raising taxes across the board on all Americans.
Clinton’s strategy of tapping income eligible for Medicare taxation added nearly a decade to that program’s solvency. His increase in the federal gas tax by $.4 per gallon raised tens of billions for infrastructure spending. Few dispute that Clinton's bi-partisan legislative successes were key factors in igniting a slumbering economy.
President Bush’s tax cuts, while often criticized for reducing federal revenues by $2 trillion since their inception, are today largely defended by both Democrats and Republicans.
Last week, House Minority Leader Nancy Pelosi recanted her previous view that raising taxes on all but the most affluent of Americans has a negative impact on the economy.
Bush’s unfunded expansion of Medicare to include Part D – Prescription Drugs – has become a core tenant supported by Progressives. His late term taxpayer stimulus programs remains popular with Keynesian economists, such as Noble Prize winner Paul Krugman.
Both of our former presidents had truly unique roles in what transpired economically, leading us to the current fiscal cliff. Yet they share a great deal with President Obama and Speaker Boehner in terms of successfully working with a Congress divided against their respective programs.
President Clinton and President Bush battled against a House that opposed their plans. Yet both former leaders found ways to bring a deal to the table, which could be legislated into existence and signed in the best interest of the nation.
President Clinton and President Bush knew the best way to make a deal often required focusing voters' attention on the big picture, while the details remained quietly hidden out of view.
As an example, how many of you can name the top income level, that paid the highest rate, under each of the following Presidents at the end of their term in office?
Marginal Tax Rate on Regular Income: over $29,750: 28%
Marginal Tax Rate on Regular Income: Over $86,500: 31%
Marginal Tax Rate on Regular Income: over $288,350: 39.6%
Marginal Tax Rate on Regular Income: Over $357,700: 35%
President Clinton's success in revising the tax code to add a 36% and 39.6% upper income bracket came at a cost. That cost was minimizing how many Americans would actually be affected by the new tax rate, and what percentage of total income could be raised across the board. It is easy to forget that less that thirty years ago, under President Reagan, we only had two rates for personal income taxation, 15% and 28%.
Broadening the bracket ranges is a tactic previously employed by both former presidents. If used in combination with reducing the number of tax brackets, could, in theory, net an enhancement to reduce combined taxes.
Revising the tax code to include larger brackets, with fewer rates, additionally offers protection against a total tax increase for the majority of filers. Both men also have experience with adding taxable income to the base by closing loopholes and limiting exemptions.
You don’t have to take much time examining the tax table rates to realize there is ample opportunity to net the $100 billion per year in new revenues President Obama has on his Christmas wish list.
Turning to reducing the growth of government spending, President Clinton’s success in this area might make him the most qualified Democrat capable of brokering a compromise the GOP will accept. Adding W.’s support for such reductions, particularly relating to avenues for real cost reduction — such as in Medicare’s Prescription Drug, or even areas of Defense spending— would add value to any deal struck.
President Obama and Speaker Boehner are missing an opportunity to potentially break the gridlock surrounding the fiscal cliff negotiation. The old adage, "a bird in hand beats two in the Bush," may be true.
But when you have two presidents hanging around in that bush, bringing them to the White House could be the best option of all.