December 04, 2012
It’s fascinating to read David Brooks’ column today. He boldly argues that Republicans:
“have to acknowledge how badly things are stacked against them. Polls show that large majorities of Americans are inclined to blame Republicans if the country goes off the ‘fiscal cliff.’ The business community, which needs a deal to boost confidence, will turn against them. The national security types and the defense contractors, who hate the prospect of sequestration, will turn against them.
“Moreover a budget stalemate on these terms will confirm every bad Republican stereotype. Republicans will be raising middle-class taxes in order to serve the rich — shafting Sam’s Club to benefit the country club. If Republicans do this, they might as well get Mitt Romney’s “47 percent” comments printed on T-shirts and wear them for the rest of their lives.”
Recognizing their weak position, he says that Republicans should be prepared to allow the top tax rate to rise to 36 or even 37 percent, but in exchange:
“Republicans should also ask for some medium-size entitlement cuts as part of the fiscal cliff down payment. These could fit within the framework Speaker John Boehner sketched out Monday afternoon: chaining Social Security cost-of-living increases to price inflation and increasing the Medicare Part B premium to 35 percent of costs.”
Excuse me, but what planet is David Brooks on? This would be comparable to Japan asking for Hawaii and parts of California as it was negotiating its surrender in World War II.
If nothing happens right now, the top tax rate goes to 39.6 percent on January 1, 2013. Let’s say that again just in case David Brooks is reading. If nothing happens right now, the top tax rate goes to 39.6 percent on January 1, 2013. There is nothing that John Boehner and the Republicans can do to stop this.
Furthermore, President Obama has a mandate to raise the top tax rate to 39.6 percent. Brooks probably missed this, but we just had a lengthy election campaign where taxes on the rich were the central issue. President Obama won.
Incredibly, Brooks’ proposal for “medium size entitlement cuts” would take a much bigger bite out of the income of retirees than his bold concessions on taxes would take out of the income of the rich. The cut to the cost of living adjustment would reduce lifetime benefits of seniors by around 3 percent. For the third of retirees that rely on Social Security for more than 90 percent of their income, this would be a cut in their income more than 2.5 percent.
In addition, Brooks wants to raise Medicare Part B premiums by 10 percentage points of the total cost from 25 percent to 35 percent. With the per person cost projected to average almost $6,000 a year over the next decade, this “medium size entitlement reform” would raise the cost to seniors by $600 a year. This is equal to 3 percent of the income of a senior with an income of $20,000, a figure that is somewhat higher than the median for people over the age of 65.
So Brooks is looking to cut the income net of Medicare expenses for the bottom half of Social Security and Medicare beneficiaries by almost 6 percent. And, his tax increases?
We don’t know exactly how Brooks would change the tax schedules, but let’s assume that the 35 percent bracket goes to 37 percent, Brooks’ higher number. And we’ll raise the 33 percent bracket to 35 percent. For a couple earning $500,000 a year, this would imply an increase in taxes of roughly $7,600 a year or 1.5 percent of their income.
So Brooks is proposing that as a starting offer (he wants bigger cuts on the table in the year ahead) moderate income seniors will see their income drop by 6 percent due to cuts in Social Security and Medicare, while the wealthy will see their income fall by 1.5 percent from tax increases. It’s interesting to think about what he would suggest putting on the table if the Republicans had won the election.
Comments