A Worthwhile Tax and Spending Proposal

With the fiscal-cliff standoff between President Obama and Speaker Boehner continuing—the pair haven’t spoken in a week—two questions arise: How will the stalemate be broken? And what should an agreement look like?

The most likely answer to the first question is still some sort of last-minute deal that raises tax rates, but not all the way back to the levels of the Clinton era, cuts spending a bit, and defers the really tough issue of how to prevent Medicare from swallowing the federal budget over the next thirty years. As I pointed out a few days ago, before the latest round of mutual recriminations, the Republicans have hardly any leverage: eventually, they will have to cave. With the White House also keen to avoid going into the New Year without an agreement, at which point the Bush tax cuts would expire and the automatic spending cuts would kick in, a compromise is the logical outcome.

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