Tax reform may be the only deficit reduction plan

Last time we looked in on the congressional “supercommittee,” its members were preparing for a sober task: slashing future federal deficits by ― for openers ― more than a trillion dollars. Yet there was reason to hope this designated dozen really could roam the full realm of government spending and taxing to reach its designated goals: An embarrassing downgrade of the United States’ credit rating had just impressed on both parties the importance of constraining this nation’s runaway debt.

How’s it going? Well, just last week:

― President Barack Obama, chastened by a backlash from liberal Democrats, renounced his summer openness to adjusting Social Security retirement benefits. The White House said the deficit reduction plan Obama unveils Monday “will not include any changes to Social Security.”

― House Speaker John Boehner, bashed by conservative Republicans for his summer openness to raising tax revenue, reiterated that yes, some tax loopholes do need to be closed. But he rejected tax increases as part of the solution, arguing that tax hikes “destroy jobs.” And …

― The calendar shrank. Under the debt-ceiling-and-deficits deal Congress struck this summer, the supercommittee has until Nov. 23 ― nine weeks from Wednesday ― to deliver its plan. Except the Congressional Budget Office has moved up the deadline to early November. The CBO says it needs time before Nov. 23 to assess whether a plan really would produce the mandated minimum of $1.2 trillion over 10 years.

Not looking good. We’re back to the Washington pastime of trying to shelter sacred cows from mere hide-trimming, let alone slaughter. And time for culling the herd grows short.

Our first preference has been for dramatic deficit reductions, with a 3- or 4-to-1 ratio of spending cuts and revenue increases. That’s a recognition that spending far beyond knowable revenue got us where we are, so spending needs to fall. What’s more, the sheer immensity (and predictable downfall) of federal entitlement programs, Social Security included, demands future changes to their eligibility, benefits or both.

But if our pols are still issuing ultimatums which make that broad an agreement impossible, a different option ― ambitious tax reform ― may be the only deficit plan Washington can adopt this year. With other plan components or alone, we’ll take it.

Note a subtle but significant shift last week: Boehner, representing a party that spent the summer demanding cuts to spending, emerged Thursday as a reinvigorated champion of … tax reform. By which we mean curtailing tax deductions and credits, as well as reducing marginal tax rates. Structure the tax code to produce some more money and throw it at the deficits ― not at new spending.

Last winter the so-called Bowles-Simpson commission, the bipartisan debt reduction group that Obama convened and then ignored, suggested eliminating tax breaks and downsizing personal income tax rates to 8, 14 and about 24 percent. The goal: to broaden the tax base and spur economic growth.

And economic growth is what this nation needs. The federal government cannot cover its obligations until the private sector creates more taxpayers. You may disagree with the Republican view that reducing Washington regulation and reducing federal spending would enable mass hirings. But given that, in the aggregate, the economy produced no new jobs last month, it’s hard to argue with Boehner’s observation Thursday that “job creators in America are essentially on strike.”

The supercommittee can, via tax reform, begin to give those job creators a stable and predictable environment. A federal debt that grows by $4 billion every day tells employers to save money today for the inevitable tax burden tomorrow. The companion localized debt debacles in states such as Illinois, where politicians have recklessly borrowed billions and foolishly expanded pension benefits, only deepen private-sector fears that adding personnel now is downright dangerous.

Count us in the noisy chorus that wants the supercommittee to “go big” ― that is, not merely to meet its minimum mandate but to make far more drastic reductions in future deficits.

But if that can’t happen, we don’t see failure to reach any bold agreement as an acceptable fallback. By itself or as part of a go-big deal, an overhaul of the federal tax system should be the true minimum mandate. Good recipes for tax simplification abound; the supercommittee could settle on one of them and take October off.

Here’s hoping that, when President Obama rolls out his deficit reduction plan Monday, he joins House Speaker Boehner’s call for aggressive tax reform. On this, two bellicose political parties can, and should, agree.

(Editorial, Chicago Tribune)