So President Obama won. Liberals are jubilant, moderates are relieved, and Mitt Romney is headed to the Cayman Islands for a consolation tour with his money.
But Obama's narrow margin of victory—he won just 50 percent of the popular vote, to Romney's 48 percent—indicates that he's a long way from easy street. And with Republicans still controlling the House of Representatives, Obama must still negotiate with some of the nation's most ardent conservatives. A mandate is something President Obama may only get from his wife Michelle over the next four years.
Obama needs to start working right away to sort out the "fiscal cliff," the next extension of the federal borrowing limit and perhaps even a "grand bargain" to fix the nation's alarming national debt, which now tops $16 trillion. He'll have to give Republicans something in order to get agreement on his own priorities, such as raising taxes on the wealthy, safeguarding Medicare, and investing more in education and infrastructure. He could start by adopting some of Mitt Romney's ideas, including a few that moderates and even liberals support, such as:
1. Tax reform: Just about everybody agrees that the current system is riddled with holes that favor the wealthy and connected over ordinary Joes, while creating all sorts of inefficiencies that crimp economic growth. Republicans fervently supported Romney's plan to cut all federal tax rates by 20 percent, while closing unspecified loopholes. Romney never explained how he'd do that while still closing the federal deficit, which turned out to be a liability for him. But Obama could adopt a more modest and realistic version of Romney's plan—cut tax rates by 5 percent, say—while getting rid of loopholes. Obama hasn't said much about tax reform, but if done right it would fall under his rubric of "fairness," while also leaving a legacy other than healthcare reform.
2. A fixed limit on tax deductions: This could be part of tax reform, or a standalone measure, but either way it would help raise desperately needed tax revenue while streamlining the tax code. In general, tax experts like Romney's idea of setting a limit on the total amount of deductions any one taxpayer can claim, because it wouldn't trigger quite the same uproar from lobbying groups as an effort to trim specific deductions would. Romney tossed out various levels, such as $17,000 or $25,000. Whatever the level, a limit would let taxpayers choose which deductions to take—mortgage interest, charitable contributions, education, child care—instead of closing the door on certain deductions that some taxpayers depend upon. It would also fall mostly on the wealthy, who are likely to go first no matter what when it comes to paying more in taxes to help Washington dig itself out from under a mountain of debt.
3. Trimming regulations: Romney got a lot of traction, especially among small business owners, by promising to thin out a thicket of regulation that many businesses face. This isn't just a federal problem, since the real snarl for many businesses comes from layers of redundant and conflicting federal, state and local rules. Obama could gain some needed credibility with "job creators," as Republicans call wealthy business owners, by making a showy effort to trim the federal bureaucracy.
Since new rules tend to be promulgated with no requirement to repeal older rules, Obama could almost certainly weed out a lot of outdated regulations with little or no harm to the environment, workplace protections, food safety and other things the government safeguards. One approach would be to adopt Romney's idea of cost-benefit analyses for every new rule, or a zero-sum regulatory regime: Every new rule must be balanced with the elimination of an old rule. Businesses would cheer.
4. Revamping Medicare: Romney should get credit for being courageous enough to propose deep reforms to this vital program. His plan would have entailed the biggest changes in the history of Medicare, by turning it into a voucher program in which the federal government paid out a fixed subsidy every year, which seniors could use to buy health insurance, instead of covering every procedure under the sun, as Medicare generally does now. Obama shrewdly ran against that idea, vowing to "protect" Medicare from the likes of Mitt Romney. Voters seemed to side with Obama.
But leaving Medicare intact won't protect it, because the program will run out of money in a little more than a decade if spending continues at the expected pace. Romney did Obama a favor by starting a national debate over what's necessary to fix Medicare, even if the whole idea is unpopular. Obama has a chance to capitalize on that with his own plan that does at least some of what Romney proposed. It doesn't hurt that Romney's running mate, Paul Ryan, is the architect of Romney's plan—and also a key House committee chairman who Obama will have to tangle with over the next four years.
5. Prune the federal government in a tangible way: Romney tried to ride a wave of small-government fervor, vowing to slash the federal bureaucracy. It obviously didn't work out, but the fervor is still there, with many Americans—including perhaps a majority of moderates—believing that federal bureaucracy has gotten too large and unwieldy. There are now 15 cabinet departments, plus 6 other agencies with cabinet-level status, and hundreds of other agencies that swell the federal bureaucracy.
Over the next four years, it's highly likely that Washington will have to cut benefits and services, while raising taxes. In this austere environment, Washington ought to be able to cut and consolidate like most U.S. employers have had to do over the last few years. It's hard to imagine that the government couldn't somehow combine or even eliminate agencies such as the departments of Interior, Agriculture, Commerce, Transportation, Education, Veterans Affairs, and even Homeland Security. Vital functions could be rolled into other cabinet departments, with no loss of effectiveness. Streamlining could take place gradually to minimize disruption.
If Obama were to be this bold, he'd directly challenge Republicans in Congress who say they want to slash the size of government, but fight behind the scenes to sustain the agencies they oversee and fund. If Obama thinks that is too daunting a task, he might ring up Mitt Romney and ask for a few pointers.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.