Behind closed doors, negotiators in Washington are working to avert the so-called fiscal cliff, the $500 billion in tax increases and spending cuts set to take effect in January that could damage the fragile economic recovery. As President Barack Obama -- not known for tough negotiating -- considers what compromises to make, he must remember his campaign pledge to begin restoring economic fairness for the middle class. To keep that promise, there is one thing he absolutely has to do: Insist on a tax increase for the wealthiest Americans.
If the president has a mandate to do anything, it is this. It came up over and over during the campaign, with Obama promising to let the Bush high-end tax cuts expire and Mitt Romney pledging to double down on them. Obama won that argument. In addition to his re-election, he can cite various polls showing strong public support for this tax increase.
That should help move Republicans who have pledged to never, ever raise taxes, even to help reduce the deficit. We're starting to see the shift already, with several lawmakers walking away from their pledge to anti-tax absolutist Grover Norquist. Sen. Saxby Chambliss, a Georgia Republican, said last week, "I care more about my country than I do about a 20-year-old pledge." Good for him.
All Americans will have to share the burden of getting the federal budget back on a sustainable course. The wealthy alone can't do it. Middle-class taxes will have to rise at some point, and costs of Medicare and other programs will need to come down.
But top earners have seen extraordinary gains in wealth, even as incomes for other Americans have stagnated or shrunk. And tax rates in the top brackets are among the lowest they've ever been. Until the recovery grows stronger and its gains are spread more widely, top earners should bear more of the burden. Whether it's done by raising rates, eliminating deductions or changing the marginal tax structure, the amount of revenue raised must be the same as if rates returned to levels in the Clinton-era -- a time of phenomenal prosperity.
There's no evidence that this kind of tax increase would affect job creation. As economist Paul Krugman points out, top earners paid an effective rate of 70 percent or more around 1960 -- twice today's top rate. During the same era, median family income doubled.
There are other things we'd like to see in this budget deal. The tax code ought to treat income from investment the same as income from work. At least some defense cuts should go forward. And there should be some spending on infrastructure and education: a strong economy relies on both, and borrowing for these investments now, with interest rates at all-time lows, is smart policy.
But none of these issues should be a deal-breaker. Only one is. Taxes for the wealthy must go up.