In the late 1990s, it was the Republicans who were the idea people. We forget it now, but during that time frame, conservatives were coming up with innovative policy approaches such as an individual mandate for insurance and cap and trade schemes for carbon emissions. Since that time, however, they’ve tacked hard to the right, and the ensuing decade has been one of ever more reactionary, not even conservative, policies. During that time, Bill Clinton was dubbed the Master of Triangulation. Basically, it worked like this: Democrats hold fast to a set of hidebound policies from the sixties and seventies, the Republicans advance a plan that has no chance of actually being signed into law, and Clinton stepped in to cut a deal that was, at a minimum, workable for everyone.
He did this on the budget, welfare, taxes and a whole litany of other projects. His accomplishments were modest, but they were solid, and they were consistent. Now, it seems our President is taking a page from President Clinton’s playbook, announcing an overhaul of the corporate tax system, which many critics argue is long overdue. Obama’s plan basically consists of lowering the top rates (which are some of the highest, if not the highest outright), and closing loopholes and deductions to offset the costs, thus effecting an overall simplification of the corporate tax code.
Now, I know we’re smack dab in the middle of silly season, and it’s tempting to let politics take the day and forestall the formulation of good policy, but we have a real chance here to do something good. A simplification of the tax code with a lowering of rates should have Republicans salivating, and Democrats would be able to weather the charge of being ‘anti-business,’ particularly given the state of the economy and the upcoming elections. Fundamentally, however, we’re going to have to cut a deal, an endeavor at which Congress has not excelled in recent memory. However, if Congress and the President were to pull this off, it’d be a boon for the economy and would do a lot to promote hiring in the private sector.
This could also serve as a model for an eventual overhaul of the personal tax code, another project that’s long overdue. If we get momentum on one area of tax policy, it would translate well into another. We haven’t had an overhaul of the tax system since Reagan’s 1986 IRS reform, and our tax system is beginning to look its age. With one fell swoop, we could spur economic growth and put this country on a more stable fiscal footing, something, frankly, that governments ought not need to be reminded that it’s their job to do anyways.