Marty Rosenzweig: Looking over the ‘fiscal cliff’
December 1, 2012
First, I wish you all a Happy Hanukkah. I'm sure President Obama, Rep. John Boehner, and Sens. Mitch McConnell and Harry Reid all get complimentary copies of the Steamboat Pilot & Today, so I ask that they please read this commentary before moving on to the often humorous and occasionally hilarious Record.
As I peer into the somewhat overhyped abyss, I am acutely aware that about half the electorate in the recent election thinks the rich should pay more and entitlements should be pretty much untouched. The other half of the voters think the rich pay enough taxes and entitlements should be cut. Now, a possible solution could employ the unusual but potentially effective method of "compromise."
However, after many years of negotiating and compromising, I have come to understand that the result of the compromise does not leave the parties feeling happy. Rather, it accomplishes just the opposite — everyone will be unhappy. You negotiate a reduction in your rent increase. You are unhappy you have to pay more, and the landlord resents he's not getting as much as thinks he deserves. That's the way it is, Washington. Get over it. Because there are no winners, losing won't be so traumatic.
On the revenue side, tax rates for the wealthy will have to go up. As for just closing loopholes? Well, loopholes are anomalies in the tax code by which (generally) the wealthy can avoid paying some taxes. However, the mortgage interest deduction, which will affect the middle class too, also has to go because it discriminates against renters. I am personally familiar with a tax accountant who has made a small fortune exploiting these loopholes for his wealthy clients, in various shades of gray. We all hate to pay taxes, but apparently the wealthy really hate it because they're willing to pay him a ton of money to avoid paying a ton and a quarter in income tax. It's like dessert comes and you get an oatmeal cookie and they get a double portion of mud pie with two scoops of ice cream, whipped cream and a cherry. "You know you're going to have to give up that cherry." "Noooo, that's the best part!" Let's close the loopholes and then talk about rates.
On the entitlement side, Social Security is easier to fix. It was meant to be a safety net, not a retirement plan. So, as we have been living longer, it makes sense to slowly raise the retirement age and end the annual cap on contributions. I can do without a few of those Social Security bucks each month, if necessary. It won't be the end of the world, really. Younger wage earners need to learn about saving for their retirement, as unthinkable as it might be to replace that iPhone every two years instead of semiannually. But seriously, it can be financially stressful, but the miracle of conservative investing and compound interest is worth pursuing (even at current rates).
Medicare is more difficult because the procedures and drugs we have to keep us healthier longer are costing way more than what we contributed. It's also much harder to distribute the cost burden because it's difficult to know how much we'll be taking advantage of those expensive options as we age. More means testing will help, but I do have an additional solution. I propose that the estate of the deceased reimburse Medicare for the dollar amount of services rendered above and beyond what was contributed. First, as it does now, the estate would transfer to the spouse (yep, straight or gay) without penalty. Then there would be a certain amount exempt before the estate would pay back Medicare. No estate? You don't owe anything (wealthy folks are down to one scoop of ice cream). This also would help start the emotional but necessary dialogue about "end of life" decisions. There is not an infinite fountain of money for keeping us alive. If you have the financial means to transplant a new heart into 95-year-old Grandma, go for it. Estate inheritance taxes will have to be left for future debate.
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It's also time for leaders of the free world to stop all this posturing in public. When our leaders sit down to negotiate, they may then have to defend a position on which they'd like to compromise but fear the wrath of their primary opponent in the next election cycle labeling them as a flip-flopper, traitor to their party, etc. As an example, moderate Republicans got torn to shreds in many primaries, as if compromise (there's that word again) is a mortal sin. Democrats are not immune but seem less dogmatic. I know, "core values," yada, yada, yada.
Obama, where is your entitlement modification plan? Boehner, tear up that stupid "no tax increase" pledge.
Finally, in the immortal words of Chet Powers: "Come on people now, smile on your brother; everybody get together, try to love one another, right now."
Marty Rosenzweig is a Steamboat Springs resident, U.S. taxpayer and Medicare and Social Security recipient.