Where I come from on this is simple: before we even begin to talk about cuts to Medicare and Medicaid, we have to do the following.
1. Let the Bush tax cuts expire for the wealthiest Americans. That certainly includes the estate tax, which is arguably the most progressive tax of all.
2. Ensure that the ratio of spending cuts to tax increases is 1:1 or, preferably, much lower than that.
3. I agree with Simpson-Bowles that capital gains and dividends should be taxed as normal income, not given preferential rates, allowing super-rich people like Mitt Romney to pay far lower rates than ordinary, working Americans (e.g., violating the “Buffett Rule,” and the Reagan rule for that matter).
4. Eliminate all subsidies to fossil fuels and other “bads,” like the corn ethanol boondoggle.
5. Institute a carbon tax – one large enough to make a big difference on CO2 emissions – immediately in order to avoid the “climate cliff” we’re about to plunge over, disastrously. I don’t care if this is revenue neutral or not, but if it’s not, some of that money can go for deficit reduction.
6. The only cuts to domestic discretionary program spending, which makes up a miniscule percentage of the budget and is NOT the cause of the federal deficit, should be to military spending. Why do we need to spend more than the next 10 countries combined? Can anyone justify that?
7. Cap deductions for home mortgage interest and other things that mostly wealthy people benefit from. Why should we be subsidizing them to buy multi-million-dollar mansions?
8. Raise the current $110,000 cap on payroll (“FICA”) withholding. Why should someone making $100 million only pay taxes on the first $100,000 and not on the remaining $99,900,000?
Once all that’s done, then IF we still have a budget deficit problem (which is highly unlikely), then we can talk about cutting Medicare and Medicaid benefits. And even in that case, we should only be talking about cuts that don’t hurt the poor, working class, or middle class Americans. We should also be continuing to figure out ways to “bend the health care cost curve” in this country, but most likely we first need to see how full implementation of “Obamacare” works out before we move in that direction. Still, is there any good reason why we don’t have a robust public option?