Beware the "Grand Bargain"

The general public seems to believe that what Bernanke called "the fiscal cliff" (and Krugman called "the austerity bomb") has been averted.  It hasn't, of course.  Sequestration and lifting the debt ceiling were kicked down the road a couple of months, but nothing, really, is settled.

During his first term, Obama seriously sought a "Grand Bargain" on tax increases and spending cuts with John Boehner — but Republicans, possibly convinced by too rich a diet of Fox News, declined, thinking they could take the Presidency and possibly the Senate as well in the 2012 elections.  Well, they were wrong.

The problem now, though, is that Obama still wants a "Grand Bargain," and probably still is willing to make entirely too many concessions on what currently are called "entitlements," but which used to be called "the social safety net."  (Yes, the progressives let the conservatives select the lexicon again.  When Republicans talk about "reforming entitlement programs," what they mean, really, is "shredding the net.")

Well, there are some changes that could be steps in the right direction.  The salary cap for FICA contributions could be lifted — or, better yet, entirely eliminated — to build the Social Security trust fund.  Since that trust fund may be invested only in government bonds, perhaps the Fed could create a new instrument — available only to the trust fund — that actually pays a little interest.  Since the Fed creates money out of thin air, it wouldn't cost taxpayers a cent, so beefing up the trust fund would not have any negative impact on the general economy.

What Medicare needs more than anything is what insurers call a more favorable experience rating — that is, it needs more members paying in who need less health care.  Hence, it makes no sense at all to raise the age of eligibility to 67, since the youngest members use the fewest services.  What should be done is to open up Medicare coverage to much younger participants.  The best way I can see to do that is to allow Medicare to compete against the private companies on the Affordable Care Act exchanges.  Uh huh, that good old public option — but there's no doubt it would cut costs.  The real solution, of course, is single payer for all.  Don't miss Eduardo Porter's column in yesterday's Times!

Needless to say, eliminating corn subsidies and the corn-based ethanol requirement for gasoline would free up a lot of money for food stamps, and raising the minimum wage to a living wage would help increase all kinds of tax revenues while reducing income inequality.  Yes, prices might have to rise, but poorer people tend to spend whatever extra income they receive, boosting sales.  That means more profits for (real and alleged) small businesses, and more employment.

I could go on, but why bother?  None of the above will happen.  After all, as Will Rogers said, "We have the best Congress money can buy."