These are complex matters. The Tax Code, Title 26 of the U.S. Code, enacted by the Congress, is voluminous. The Treasury regulations, Part 26 of the Code of Federal Regulations, promulgated by the Treasury Department, is far more voluminous. The Other Official Tax Guidance that interprets those is worse. Those are where the loopholes reside. Some probably made economic sense in the past but many no longer do. Changes will require massive rewrites of the entire tax code and of the Treasury regulations. That will take years of labor by our “hardworking” CongressCritters, their “expert” assistants and the geniuses at Treasury. Such things cannot be done comprehensively and soon. Doing it sensibly but even piecemeal now, in time to prevent a default in early August, is impossible. Campaigning and raising funds for the 2012 elections was easier and so that has been done instead. ObamaCare remains funded and so do most other problems created during the previous Congress because the current Congress didn’t do its job.
The backup plan that President Obama may or may not agree to seems far less specific than the McConnell “uber-clever” plan which, like it or hate it, provides a few bare specifics for “kicking the can” down the road till next year to avoid a default in August — now two weeks away. The backup plan may or may not include a “binding commission” to do something; we don’t know what. Nor do we know what “binding” may mean. If there is to be a commission, we don’t know how its members are to be chosen or by whom or what it is to review. Entitlement programs? Probably. Taxes? Probably.
Either the McConnell plan or the maybe-if-I-gotta-do-it Obama backup plan would open wide a big loophole for the negotiators to slip through to avoid making, and taking the blame for, “tough decisions” and doing the “tough work” to get a deal on spending — as they propose or reject ambiguous schemes to raise taxes by closing unspecified loopholes for those upon whose investments and entrepreneurship the economy depends.
Now that we have arrived at a crisis point and it’s impossible to deal with these matters as must eventually be done, why not focus immediately on whatever big stuff can be accomplished and leave the demagoguery about petty stuff for later? Adjusting depreciation schedules for corporate jets — apparently a biggie for President Obama — appeals to some but the beneficial impact on the national debt would be negligible. Even dealing with the big stuff immediately probably won’t happen in time.
Here are my thoughts on how to proceed:
Grant an immediate one trillion dollar debt limit extension valid only through August 1, 2012, on which date the debt limit will revert to the present one. Borrowed funds are to be used only
1. To pay interest on debt,
2. To redeem debt when due, and
3. To provide necessary funding for federal operations as authorized by previously enacted legislation but only, (a) until August 1, 2012, or (b) as hereafter authorized by the Congress.
Mere promises to maybe deal with substance won’t be kept. This suggestion does not rely on promises and will dump the problem back in the Congress where it belongs. Majorities of both houses will, as always, be needed to pass the necessary legislation appropriating funds for specific purposes and refusing to appropriate them for other specific purposes. Both will be necessary. It will give the Congress a year to get its act together and, with some luck, force the beginnings of a balanced budget; only with the consent of both houses can the budget remain unbalanced. That’s the purpose of paragraph 3. The suggestion will require action by our CongressCritters, mindful of the fast approaching November elections, the results of which seem more important to them than anything else.
There is a quote dubiously attributed to Otto von Bismark — “The lesser the people know about how sausages and laws are made, the better they sleep in the night.” Getting a good opiate-induced sleep is unappealing when the cost is a perpetually debilitating hangover as severe as that from which the economy now suffers, and not only due to the current debt limit fiasco. Until those who pay for and eat Bismark’s sausages — and President Obama’s peas — at least know what they contain and how they were made a persistent hangover is likely. “Trust me. I’m from the government” no longer works, even for some of those perpetually awed by President Obama.
Trust and simplicity can be glorious, but simplicity can come only if there is trust. Now, it is very scarce. The Simple Song is one of my favorites.
However, if forced to join in the “Simple Song” sung very differently by President Obama and the other parties to the negotiation, twist and turn as we may the chances of our coming down right are Zero. And if we put up with it, that’s what we deserve.