Nobody likes to compromise, we all feel like we've 'lost' something when we do. The reality in American politics is that our vast individuality mandates we compromise at times. The current budget war is a prime example of knowing the difference between valor and stupidity. Republicans are leaning, strongly, towards stupidity.
First, like most conservatives, I don't believe our budget issues are caused by a lack of revenue. They're driven by too many programs, including wars, poorly managed by too big bloated a government. I'd welcome a 10% cut in all agencies, and a 12% cut in the DOD as a way of getting us back on track. But whatever the reasons are that we find ourselves staring into the abyss of default, we need to figure out a way to avert disaster - quickly. In other words, let's not let the noble idea of limiting government spending became a stupid rationale for destroying the economy.
On June 30th I recommended that Republicans negotiate with the WH for a 2:1 ratio of cuts to new taxes - for every dollar of new tax revenue coming in there would have to be at least $2 of real cuts in spending. Various reports indicate the Democrats are willing to go as high as 6:1...$6 of spending cuts for every dollar of new revenue. Simply Amazing. The Republicans are idiots if they don't take this deal. Never in the history of our 2-party political system have the Democrats ever put something like this on the table. The total reduction in the deficit could easily reach $4,000,000,000,000. Further, President Obama is apparently willing to discuss significant changes (for the better) in the tax code and benefit reductions in Medicare and SSI.
So what could the Republicans hold out for? They're already losing the PR battle on this one so they have to be very cautious and not over-reach. If the debt ceiling isn't raised, and we do have some type of default, that will have give the Democrats all the cover they need to blame our economic ills on the Republicans in 2012. But there is one area they may want to push for, a flat tax. Start with proposing a flat tax for everybody, including businesses. It probably won't fly with Dems, especially since they've been pretty generous along the way, but it will do a couple of things. First, it brings publicity to the concept, which is good as most Americans see it as fairer than the current lobbyist rigged maze. Second, since Dems won't agree to it anyway, Reps can then 'give it up' during the negotiations, showing Americans they aren't spoiled brats who have to always get their way. (Just manipulative politicians) Finally, Republicans can give up part of the flat-tax concept during negotiations, but not completely. Instead of all payers being subject to it, push for a flat tax on businesses only, not individual tax payers. Businesses need to operate in a predictable environment...the lack of which is killing confidence right now. An across the board flat tax on all business revenue is wonderfully predictable. Additionally, the flat-tax can be used as a way to decrease the power of lobbyist and DC meddling. Assuming there are no carve-outs and special loopholes, lobbying for them doesn't make much sense. Overall, the goal needs to be to get a flat-tax on the books. Remember, the first sale is the hardest sale. Once people get comfortable with the flat-tax expanding it later will be greeted with cheers not jeers.
Oh ya, staying out of the abyss is pretty important, too.
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