WASHINGTON -- With the tax-hiking proposal President Barack Obama sent to Congress on Thursday, it seems the president is finally heeding a lesson he learned in the first month of his first term.
At a press conference in February 2009, shortly before Congress passed his landmark stimulus bill with very few Republican votes, a reporter asked Obama how he would get more bipartisan agreement for future legislation.
"Are you going to need a new legislative model, bringing in Republicans from the very beginning," asked NPR's Mara Liasson, "getting more involved in the details yourself from the beginning, or using bipartisan commissions?
Obama responded that he had, in fact, sought GOP input from the beginning of the stimulus bill's creation. And he said the Republicans really liked all the nice tax cuts the White House had included in its initial framework.
"I suppose what I could have done is started off with no tax cuts, knowing that I was going to want some, and then let them take credit for all of them," Obama said. "And maybe that's the lesson I learned."
It's a lesson he put to use Thursday. For weeks, congressional Republicans have complained that the president hadn't offered a plan to avert the so-called "fiscal cliff," but on Thursday the Obama administration finally offered a detailed proposal. Republicans are now upset: It includes $1.6 trillion in taxes on the rich, $400 billion worth of unspecified cuts to social insurance programs, and effectively unilateral authority for the president to increase the government's borrowing limit.
"The White House spends three weeks trying to develop a proposal and they send one up here that calls for $1.6 trillion in new taxes, calls for a little, not even $400 billion in cuts, and they want to have this extra spending that's actually greater than the amount they're willing to cut," House Speaker John Boehner (R-Ohio) said on Friday. "It was not a serious proposal. And so right now we're almost nowhere."
If they find middle ground, Boehner will be able to take credit for helping to make it happen. Though it's a lesson Obama said he learned a long time ago, it's not a strategy he's used much before in his constant quest for a grand bargain.
Rather than champion a government takeover of the health care system, for instance, and let Republicans sign on to an eventual compromise, Obama sought market-based reforms and solicited GOP input from the start. During the summer of 2009, Sen. Max Baucus (D-Mont.), one of the administration's top lieutenants in the Senate, spent months in bipartisan "Gang of Six" talks, to the bafflement of many observers. Shortly before the negotiations fell apart, one of the gang members revealed his true intentions.
"If I hadn't been involved in this process as long as I have and to the depth as I have, you would already have national health care," Sen. Mike Enzi (R-Wy.) said during a town hall that August. "Someone has to be at the table asking questions ... If you're not at the table, you're on the menu."
Even though the final product included many things potentially appetizing to Republicans -- the high-risk insurance pools that were the centerpiece of their alternative proposal at the time, the framework based on what Republican Gov. Mitt Romney had done in Massachusetts -- Republicans called it a government takeover and voted no anyway.
Near the end of 2010, when Bush-era tax cuts would soon expire, and Democrats looked to Obama to keep his promise to ditch the cuts that benefited rich people, the White House waved a white flag before negotiations even started.
"We have to deal with the world as we find it," Obama adviser David Axelrod told The Huffington Post that November. "The world of what it takes to get this done."
As Politico's Mike Allen wrote in Politico Playbook, while the outcome was to be expected, many were shocked by how fast Obama retreated from his tough tax talk. "We had told you this was the end game," Allen wrote, "but we're surprised there wasn't a dance first."
And last year, Obama and Boehner sought a "Grand Bargain" that would have cut spending on social insurance programs in return for a promise of later tax hikes. Republicans fled from the deal rather than be seen as cooperating with higher taxes, but it was a better deal for tax-haters than what Obama's offering today. (Neither deal is good for people who might rely on programs like Medicare, Medicaid, and Social Security.)
"There is going to be some prolonged negotiations," Obama said Friday. "And all of us are going to have to get out of our comfort zones to make that happen. I'm willing to do that."
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The U.S. incarcerates its citizens at a rate roughly <a href="http://www.parade.com/news/2009/03/why-we-must-fix-our-prisons.html" target="_hplink">five times higher than the global average</a>. We have about 5 percent of the world's population, but 25 percent of its prisoners, according to The Economist,. This status quo costs our local, state and federal governments a combined $68 billion a year -- all of which becomes a federal problem during recessions, when states look to Washington for fiscal relief. Over the standard 10-year budget window used in Congress, that's a $680 billion hit to the deficit. Solving longstanding prison problems -- releasing elderly convicts unlikely to commit crimes, offering treatment or counseling as an alternative to prison for non-violent offenders, slightly shortening the sentences of well-behaved inmates, and substituting probation for more jail-time -- would do wonders for government spending.
End Of The Drug War
The federal government spends more than <a href="http://www.cbsnews.com/8301-18563_162-20072096.html" target="_hplink">$15 billion a year</a> investigating and prosecuting the War on Drugs. That's $150 billion in Washington budget-speak, and it doesn't include the far higher costs of incarcerating millions of people for doing drugs. This money isn't getting the government the results it wants. As drug war budgets balloon, drug use escalates. Ending the Drug War offers the government two separate budget boons. In addition to saving all the money spending investigating, prosecuting and incarcerating drug offenders, Uncle Sam could actually regulate and tax drugs like marijuana, generating new revenue. Studies by pot legalization advocates indicate that fully legalizing weed in California would yield <a href="http://canorml.org/background/CA_legalization2.html" target="_hplink">up to $18 billion annually</a> for that state's government alone. For the feds, the benefits are even sweeter.
Let Medicare Negotiate With Big Pharma
The U.S. has <a href="http://www.reuters.com/article/2009/06/01/us-healthcare-costs-sb-idUSTRE5504Z320090601" target="_hplink">higher health care costs than any other country</a>. We spend over 15 percent of our total economic output each year on health care -- roughly 50 percent more than Canada, and double what the U.K. spends. Why? The American private health care system is inefficient, and the intellectual property rules involving medication in the U.S. can make prescription drugs much more expensive than in other countries. Medicare currently spends about $50 billion a year on prescription drugs. According to economist Dean Baker, <a href="http://www.cepr.net/documents/publications/intellectual_property_2004_09.pdf" target="_hplink">Americans spend roughly 10 times more than they need to</a> on prescription drugs as a result of our unique intellectual property standards. These savings for the government, of course, would come from the pockets of major pharmaceutical companies, currently among the most profitable corporations the world has ever known. They also exercise tremendous clout inside the Beltway. President Barack Obama even <a href="http://www.huffingtonpost.com/2012/09/02/barack-obama-politics_n_1847947.html" target="_hplink">guaranteed drug companies more restrictive -- and lucrative -- intellectual property standards</a> in order to garner their support for the Affordable Care Act.
Offshore Tax Havens
The U.S. Treasury Department estimates that it loses about <a href="http://www.ctj.org/pdf/stopact.pdf" target="_hplink">$100 billion a year</a> in revenue due to offshore tax haven abuses. Sen. Carl Levin (D-Mich.) has been pushing legislation for years to rein in this absurd tax maneuvering, but corporate lobbying on Capitol Hill has prevented the bill from becoming law.
Deprivatize Government Contract Work
In recent years, the federal government has privatized an enormous portion of public projects to government contractors. Over the past decade, the federal government's staffing has held steady, while the number of federal contractors has <a href="http://pogoarchives.org/m/co/igf/bad-business-report-only-2011.pdf" target="_hplink">increased by millions</a>. This outsourcing has resulted in much higher costs for the government than would be incurred by simply doing the work in-house. On average, contractors are paid <a href="http://pogoarchives.org/m/co/igf/bad-business-report-only-2011.pdf" target="_hplink">nearly double</a> what a comparable federal employee would receive for the same job, according to the Project On Government Oversight.
Print More Money
There's an old saying in economics: You have to print money to make money. <a href="http://www.huffingtonpost.com/2012/10/09/underwear-sales-growth-economy_n_1952214.html" target="_hplink">Okay, there's no such saying</a>. Nevertheless, the great boogeyman of many conservative economic doctrines -- inflation -- isn't such a bad idea during periods where much of the citizenry is drowning in debt. Inflation is by no means a perfect remedy: it's a stealth cut to workers' wages. But it also has many benefits that are often unacknowledged by the Washington intelligentsia. Inflation makes housing debt, student loan debt and any other private-sector debt more manageable. Today, when <a href="http://www.corelogic.com/about-us/researchtrends/asset_upload_file448_16434.pdf" target="_hplink">10.8 million</a> homes are underwater -- meaning borrowers owe banks than their houses are worth, moderate inflation could ease that debt burden. By effectively reducing monthly bills, moderate inflation could actually put more money in the pockets of these homeowners to spend elsewhere, thus stimulating the economy. Moderate inflation -- 5 percent or so -- could also help alleviate the <a href="http://www.cbsnews.com/8301-505145_162-57555780/student-loan-debt-nears-$1-trillion-is-it-the-new-subprime/" target="_hplink">$1 trillion</a> in student debt currently plaguing America's graduates. Make no mistake -- hyperinflation of 20 percent, 30 percent or more -- is bad. But the U.S. has ways to crush inflation when it gets out of hand, as proven by the Federal Reserve under then-Chairman Paul Volcker in the early-1980s.
Print Less Money
The government prints a <em>lot</em> of $1 bills. But it turns out that minting $1 coins is much, much cheaper. Over the course of 30 years, the government could save $4.4 billion by switching from dollar bills to dollar coins. Here's looking at you, <a href="http://www.usmint.gov/mint_programs/nativeamerican/" target="_hplink">Sacagawea</a>.
Immigration: Less Detention, More Ankle Bracelets
The government spends <a href="http://newamericamedia.org/2012/04/ice-slow-to-embrace-alternatives-to-immigrant-detention.php" target="_hplink"> $122 per person, per day</a> detaining immigrants who are considered safe and unlikely to commit crimes. The government has plenty of other options available to monitor such people, at a cost of as little as $15 per person. For the first 205 years of America's existence, there was no federal system for detaining immigrants. The process began in 1981.
Financial Speculation Tax
Wall Street loves to gamble. In good times, financial speculation is the source of tremendous profits in America's banking system, but when the bets go bad, the government picks up the tab, as evidenced by the epic bank bailouts of 2008 and 2009. Unfortunately, this speculation is difficult to define in legalistic terminology and even more difficult to police. One solution? By taxing every financial trade at the ultra-low rate of 0.25 percent, the U.S. government can impose a modest incentive against gambling for the sheer sake of gambling. If there's an immediate cost to placing a bet, a lot of traders will choose not to bet. What's more, this tax could raise about <a href="http://www.ips-dc.org/media/why_a_financial_transaction_tax" target="_hplink">$150 billion a year</a> for the federal government.
Taxing greenhouse gases would generate $80 billion a year right now, and up to $310 billion a year by 2050, <a href="http://www.brookings.edu/research/papers/2012/07/carbon-tax-mckibbin-morris-wilcoxen" target="_hplink">according to an analysis by the Brookings Institution</a>. It would also help avert catastrophic ecological and economic damage from climate change.