Band-Aid Anyone?

In mid November, I outlined my ideas for how our politicians ought to address a long term solution for the pending financial cliff. With just three days to go, clearly a long term solution isn’t in the cards before the deadline. With that sad but not unexpected reality in front of us, what can Obama, Boehner, Reid, McConnell, and the rest of our court jesters manage to do to at least avoid every American paying thousands more in taxes this year? Below is my band-aid solution until the longer term plan can be developed.

First, it’s glaringly clear that neither side is going to “win”. If anything is going to be agreed upon, it’s going to have to be a compromise. Both sides will get something they want and both will give up something they don’t want to lose. From a revenue perspective, Boehner has suggested limiting the higher, Clinton era tax rates that are about to kick in to millionaires only. This is in response to Obama’s call for applying those higher rates to anyone making over $200K per year. Limiting the higher tax rate to millionaires would mean only the richest 250K Americans would pay more. That’s about $250B in new revenue over 10 years.

For the sake of a short term deal, let’s say Obama and the Democrats take Boehner up on this offer. Now, to make the Republicans (and Libertarians like me) happy, let’s find $250B in savings over the next decade to match that increased revenue without stripping our military, intelligence, or needy communities bare.

If Congress and Obama do nothing, automatic cuts to spending will come out to $1.2 trillion dollars over the next ten years. That’s $120 billion a year, split almost evenly between defense and benefits. To satisfy our balanced band-aid approach, let’s ask for less than ten percent of that. $10 billion in annual DOD discretionary spending and another $10 billion from the combined departments of Health and Human Services, Housing and Urban Development, Treasury, and Interior. That’s $20 billion saved per year, totaling $200 billion over the next ten years.

Next, as I mentioned in that November post, we’re giving away over $8 billion in aid to Iraq, Pakistan, and Afghanistan every year. Let’s cut that in half. $40 billion saved over the next ten years and it doesn’t impact a single citizen.

And finally, the EPA has an annual budget of $8.7B. Their job is to make it more expensive for companies to do business by enforcing higher environmental standards on things like fracking and mining in order to provide cleaner air and water. Let’s ask the EPA to take one for the team themselves over the next decade to the tune of $1B per year. That’s the last $10 billion we need to make our goal.

Make no mistake, $250 billion dollars over ten years won’t solve our deficit problem, but it would solve the crisis our government and people are facing this weekend and might be the sort of compromise that could lead to a bigger, better deal down the road.