Political Solution to Avoid the Fiscal Cliff

Here is a plan that will decrease federal spending by $100B per year and that will create new federal revenues of $200B per year.  The net impact will be a $200B reduction in the deficit, or, over 10 years, $2T reduction in debt.  The plan:

(1.) Cut yearly entitlement benefits (medicare, medicaid, social security and income security) by $100B (this represents a 5.4% cut in entitlements!);

(2.) Calculate the dollar impact of (1.) on each taxpayer income group, and then adjust the income and payroll tax rates downward such that the net impact of (1.) and (2.) combined, for each income group, is neutral (this will amount to a $100B reduction in annual taxes);

(3.) Impose a surtax onto all tax filers at the level of 1.5% of gross income.  (US total annual personal gross income totals $13.4T, so this will bring in $200B per year of new revenues.)

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The Republicans should be able to live with this plan because it reduces federal spending, it does not decrease defense spending and it does not increase income tax rates.  (Payroll taxes are not income taxes - they are associated with specific programs such as medicare and social security.  This surtax is not an income tax either - it's associated with the specific program of debt reduction.)

The Democrats should be able to live with this plan because hardships imposed on taxpayers due to loss of entitlements will be compensated 100%, and the burden of pay down of the debt will be spread equally across all taxpayers - all will pay their fair share. 

Both parties should be motivated to implement this plan this because it will avoid the fiscal cliff and the economic recession that would surely accompany it.

We, the non-politicians, should be able to live with this plan. 1.5% loss of gross income will be painful, but we've known for a long time now that we've been getting by on borrowed money.  On the positive side, this could be the last big concession we have to make in order to finally fully recover our economy from the 2008 recession.