The Dems have to give on entitlements and the GOP has to give on tax increases...
Originally Posted by timpage
Quite right; that ultimately must happen.
I just hope the transition to a "grand bargain" isn't forced by an ugly, painful process following a severe sovereign debt crisis.
But the Democrats also must acknowledge that they have to give on tax increases, not just the Republicans! The former only want to raise rates on those earning more than $250K/year. That would raise additional revenue of only a fraction of one percent of GDP. Both parties have become aggressive tax-cutters; it's just that the Democrats have restricted the cuts to the non-affluent.
The Bush-era tax cuts would have been perfectly OK if we had restrained spending increases since 2001 to inflation plus population growth. But that was not possible without forcing something to give, largely because of increasing health care costs and an aging population. (And that's true even if we hadn't started squandering vast amounts of money on other things about a decade ago.) Now about 11,000 Baby Boomers become newly eligible for Medicare and Social Security every day.
It would obviously be a violent shock to our easy money/deficit-spending-addicted economy to create an abrupt fiscal consolidation involving both taxes and spending, but I think we need to start making plans to phase it in.
Of course, we could just continue borrowing and printing money like there's no tomorrow, and continue to rely on the Fed to do a new iteration of QE a couple of times each year.
What could possibly go wrong with a sound plan like that?