The fiscal cliff is now less than six weeks away. Negotiators are reportedly locked away behind closed doors working on a grand bargain to avoid the tax hikes and spending cuts that will hit on January 1. Most of the debate so far has centered on how best to raise taxes on the wealthy: whether to increase tax rates, as the president demands, or eliminate deductions and loopholes, as some Republicans seem to be open to considering. Unfortunately, these priorities are almost entirely upside down.
Therefore, let me offer some unsolicited advice for the negotiators:
You can’t hike taxes on the rich enough to balance the budget. President Obama has called for $1.6 trillion in tax hikes over the next ten years. While that is large enough to do serious damage to the economy, it would amount to just 16 percent of the combined deficits that we are projected to face over that period. In fact, the president’s proposed tax hike doesn’t even cover the $2.6 trillion in spending increases that he has called for over the next ten years. Obamacare alone will add $2.15 trillion in federal spending by 2022.