I am so tired of all this “fiscal cliff” nonsense in Washington—whether we like it or not, our elected officials created a mechanism for automatic spending and revenue consequences if a longer-term resolution could not be reached.  So, if it is not reached, I say let the “sequester” happen.  On the revenue side, we will be little worse off than the Clinton years and the tax base will be broadened, the spending cuts will be the first real cuts we’ve made in a long time, and the resulting harm to the economy and the military probably will occur over the next few years regardless of what Washington accomplishes by the end of this year.

However, it probably is worth trying one more round of negotiations.  So, for what it’s worth, I am going to present my proposal for the GOP position as it enters the final stage of this process.  I could go into a lot of explanation here as to my reasoning behind the following proposal, but I think that most conservatives can probably figure out the basis for each of the ideas without a lot of debate.  So, if I were advising Speaker Boehner, here is what I would put on the table to avoid the fiscal cliff—and I would present it as the same sort of “take it or leave it” proposal that Obama seems to be comfortable with:

1. The Bush-era tax rates would be made permanent for everyone making an income below $1 million a year.  For everyone making between $250,000 and $500,000, itemized deductions and credits would phase-out so there would be no credits or deductions above $500,000 (except for the mortgage deduction on a portion of the value of one primary residence, and the charitable deduction).  For everyone making $1 million or more, the top rate would return to 39{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}.
2. Corporate and capital gains rates would be reduced to rates that would make them the most competitive in the world, but the rules defining “capital gains” would be tightened to exclude earned income from investment work and to avoid re-characterizing earned income from professions as capital gains—capital gains should limited to return on investments of capital, period.
3. The federal estate tax would be permanently set to begin to tax estates worth more than $10 million, and that figure would index over time.
4. Means testing for receipt of Social Security and Medicare benefits for those who were born on or after January 1, 1963, would be triggered by a net worth of $5,000,000 (exclusive of the net value of a primary residence) at age 65.  For Medicare, the system would be converted to a premium support program for those born on or after January 1, 1963, and whose net worth (exclusive of the net value of a primary residence) is above $5,000,000.
5. Federal spending for the 2013 fiscal year would return to the fiscal 2008 (pre-TARP) budget baseline, and the line-items of that budget baseline.
6. Additional infrastructure spending to upgrade bridges, ports, and interstate highways should be appropriated and be paid for solely by increases in user fees, sales of radio-wave spectrum, leases and royalties of federal lands, and the federal gas tax.
7. All non-military and non-entitlement spending would be based on zero-based budgeting starting with the fiscal 2015 budget, and Sunset review should be established for all federal departments and agencies, except the Pentagon (which should be set on it’s own review process).
8. All increases in the federal debt limit after January 1, 2013 must be matched by spending cuts.
9. If additional, consistent reforms contained in either the Bowles-Simpson plan or Domenici-Rivlin plan, are not enacted by the end of the 2013 fiscal year, the tax rules would return to the Bush-era laws and become permanent.

Then, if the Dems refuse to debate and deal with this proposal, I would propose that the House and the Senate pass their competing visions.  After passage, James Baker and George Mitchell should be appointed to attempt a one-day mediation with the conference committee members from both houses and the White House to try to accomplish a temporary resolution for a final bill that the President will sign.

If that mediation is unsuccessful, we let the sequestration occur.