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1. How to structure the deal? Publicly and unequivocally accept rate increases, but insist that they come paired with true spending cuts. Agree only to pass a tax rate increase, but not all the way to the Clinton rates, if it paired with a bill which includes true entitlement reform. 2. Or, if there’s not enough time for that, agree to a one-year rate increase that’s paired with a few structural reforms, like increasing the Medicare eligibility age or means testing, with the understanding that the bill will be renewed the following year only if paired with true comprehensive entitlement reform.
3. Both parties need to have skin in the game. Politically, the hardest thing to ask of the Republicans is that they propose an increase in tax rates. The hardest political feat for the Democrats is to propose entitlement reform. Employing only-Nixon-can-go-to-China logic, both must occur. Acknowledging their weak bargaining position, the Republicans should go first and unequivocally accept rate increases for the wealthiest two percent. Then the Republicans would have the credibility to argue that they have done their part, and demand that the Democrats put forward a serious plan for entitlement reform.
4. Imagine if the Republicans offered this deal. The dynamic of the debate could change completely.
Instead of all the attention being on the Republicans, their unwillingness to ask a bit more from the wealthiest among us, and the Norquist pledge, the spotlight would shine on the Democrats. Are they really willing to cut spending? Are they really willing to reform entitlements?
All of the sudden, the Democrats would lose their main talking point — a talking point which they have been employing, successfully, for over a decade.
Of course, a big problem here is that the Obama White House just spent a billion dollars trashing true entitlement reform, premium support. But James Capretta does offer a plan B.
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