Robert W. Patterson: Cooperating to revive the economy would help GOP, too

PAUL LACHINE / newsart.com
PAUL LACHINE / newsart.com
Posted: November 26, 2012

Robert W. Patterson served as a welfare adviser in the Corbett administration

Instead of learning from the election results, Democrats and Republicans are retreating to familiar corners on the so-called fiscal cliff. President Obama insists on threatening to increase taxes on big business and affluent households earning more than $250,000 a year. Speaker John Boehner (R., Ohio) and Senate Minority Leader Mitch McConnell (R., Ky.) are claiming that they received a mandate not to increase tax rates.

This is the same old dog-and-pony show, with both parties in search of a "grand bargain" that balances the budget by 2040 or maintains federal spending at an arbitrary percentage of GDP - abstractions that excite only the political class in Washington.

Here's what is being missed: the opportunity to address the more important demographic cliff, and find common ground on reversing the steady and relentless demise of Middle America that predates Presidents Obama and George W. Bush.

The need for a better bargain for the middle class is the real lesson of 2012. That more important deal would focus on delivering tangibles to improve the lives of an anxious electorate, like private-sector jobs at high wages and good benefits for families.

What might such a pro-middle-class program look like? Here are some possible elements:

Win one for the Gipper: Instead of sticking to the Bush tax cuts, the GOP could win points by compromising and returning to Ronald Reagan's 1986 reform formula: tax labor and investment income at exactly the same rates. Treating all forms of income identically for tax purposes not only represents true fairness but is the only kind of reform that would yield the broadest possible tax base, the greatest incentives for economic growth that lifts all boats, and the best chance of increasing revenue for Uncle Sam in the long term, according to economist John Mueller.

Split income, not hairs: The GOP should also work with the president to hark back to the Revenue Act of 1948, legislation that laid the seeds of the postwar marriage and baby booms, an overlooked engine of middle-class expansion and lasting economic growth. That legislation introduced generous personal and dependent deductions, as well as "income splitting." Income splitting, in essence, taxes married couples at the lower rate of single taxpayers with half the income. If fully reintroduced, these popular features could help reverse the declining rates of family formation and fertility, which are truly at the heart of the long-term Social Security and Medicare shortfalls, and spark another 1950s-like boom.

Slash taxes on job creation: One of the truly insane features of our current system is that, through the payroll tax, it penalizes both employers and employees heavily for job creation. Both sides could agree on the job-boosting step of extending the 2011 and 2012 payroll tax-cut for at least five more years - and making it applicable to both employer and employee. The budget hawks would hate this move, but the sorry state of the U.S. job market, coupled with the over-reliance of the payroll taxes since the Reagan era to generate general-government revenues, demand this kind of tangible relief for American workers.

Make Sandy prove handy: In light of the devastation of the mid-Atlantic states by Hurricane Sandy, millions of middle-class jobs with high wages could be created through an interstate highway-style initiative that rebuilds infrastructure nationwide. Jobs would also flow from unleashing the full benefits of rising U.S. oil and gas production and upgrading our energy-distribution system, including the Keystone pipeline. Tapping U.S. materials and labor, such jobs would rebuild roads, highways, and bridges, protect coastal areas from future natural disasters, and turn the United States into an energy powerhouse.

This four-point plan to reverse the economic and social dislocations of the last 20 years would be a winner for both sides. Boehner and McConnell could hold fast to no tax increases in a way that clearly serves the interests of middle-income Americans. Instead of the president expanding the welfare state - further undermining the very bourgeois values needed to achieve the American Dream - and Republicans seeking austerity budget cuts, both could offer a package to deliver millions of "family wage" construction jobs.

This is the "grand bargain" that Boehner and McConnell ought to seek with the president before the end of the year. Would such a strategy help Obama? Of course. But it would advance the sad-sack Republicans more. By striking a deal that's good for the American people, they would gain a fighting chance with the blue-collar vote that cost the GOP the presidency - and gain credibility for further government reforms.


E-mail Robert W. Patterson at rwpatterson79@verizon.net.

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