Opportunities for bold actions just keep passing by

We all know that the date is fast approaching when the United States will default on its obligations, if Congress does not raise the debt limit.  And we all know that the Democrats and the Republicans can’t find a way to agree.

Most Democrats are unwilling to make the painful choices that are necessary to save the major entitlement programs, Medicare, Medicaid, and Social Security.  And most Republicans are unwilling to accept any tax increases, like the ones on the wealthy, that the President is proposing.

The President to his credit has said that he’s willing to entertain entitlement reform if, and only if, the Republicans will meet him in the middle, and that means agreeing to tax hikes on the wealthy.

But the Republican Speaker of the House, John Boehner, won’t take the tax hike step.  And, thus, the negotiations are deadlocked.  Finding a way to break the logjam requires that we understand clearly why Speaker Boehner is paralyzed on the tax issue.

He’s paralyzed because most of the Republican Caucus is adamantly opposed to any tax increase.  Thus, if Boehner agrees with the President on a deal that includes tax increases, the House Republicans will likely reject the plan and Boehner as their Speaker.

Why is there no wiggle room among the House Republicans on any tax hike?  Here’s the two-word answer:  Grover Norquist.

Norquist is the founder of the organization, Americans For Tax Reform. The organization opposes all tax increases as a matter of principle.  And the organization has skillfully persuaded 236 House members and 41 Senate members to sign their Taxpayer Protection Pledge.  Most House Republicans have signed on the dotted line.  And there’s more.  These Republicans know that, if they to break their pledge, Norquist’s organization would likely attempt to defeat them by supporting someone else in the next primary election.

So the real question is how can this lock be picked.  The key that will open the lock is corporate tax reform—radical corporate tax reform. 

All Americans want job creation.  And we know that job creation isn’t happening.  We also know that American corporations are sitting on $1-2 trillion that they are unwilling to invest in the present state of economic uncertainty. Were American firms to invest this capital it would be an enormous job creator.

President Obama should break the budget impasse by proposing a radical reduction in the corporate tax rate from its current level of 35% to 5%.  Corporate America would love it, and so would the labor unions.  It would give American businesses and their employees a huge competitive advantage in the world market.

Moreover, business and labor would lobby Congress to pass a budget deal with this bonanza in it.  And guess who the business community lobbies the most effectively—the Republicans.

And there you have it.  The Democrats are forced to agree to entitlement reform, the Republicans are forced to agree to tax hikes on the wealthy, and it’s all because business and labor are pushing both sides to agree so that corporate taxes go down, business begin investing again, and jobs, lots of jobs, are created.

It’s called—WIN—WIN.

LeRoy Goldman

July 12, 2011

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