By Matt McDonald, (202)-822-1205, mmcdonald@hamiltonps.com

Today, HPS releases the final report in a series of three intended to jumpstart a discussion of the economic policy path forward, both in terms of politics and policy.

As difficult as it has been to coax the economy back to strong growth, the political solution to both short and long term issues has been even more elusive. In this report, we have tried to diagnose the causes of gridlock and identify a potential path forward. We find:

  • Long-term deficit reform focusing on entitlements is the only way to create any appetite for significant near-term actions to boost the economy, beyond those changes that cost nothing.
  • Democrats are unwilling to make major changes to entitlement programs without increased taxes on the rich so that the deficit reduction is shared more broadly.
  • Republicans are unwilling to entertain higher taxes of any kind because the problem is caused by spending. They view higher taxes as a slippery slope that will not fundamentally fix the problem, will result in more tax hikes in the future, will permanently enlarge government, and will ultimately undermine the dynamic character of the American economy.
  • Because of these twin concerns, we believe successful negotiations on deficits and entitlements must start by agreeing to a long-term goal for tax revenue as a percentage of GDP, followed by a separate discussion of how that revenue is raised and spent, thus addressing the primary fears of both Democrats and Republicans and narrowing the set of policy choices on entitlements.

Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House.ᅠ Prior to joining HPS, Matt worked for McKinsey and Company. ᅠHe holds an MBA from MIT’s Sloan School of Management and an undergraduate degree in economics from Dartmouth College.

HPS the Path Forward – Political Solutons by Hamilton Place Strategies