Budget Fight: Making the Case for Gridlock
David Leonhardt lays out a revolutionary proposal that could solve all of our deficit problems in one fell swoop:
A trick question: If Congress takes no action in coming years, what will happen to the budget deficit?
It will shrink — and shrink a lot. This simple fact may offer the best hope for deficit reduction.
As federal law currently stands, some significant tax increases are set to take effect in coming years. The most important is the scheduled expiration of the Bush tax cuts at the end of 2012.
Of course, both parties favor the permanent extension of most of those tax cuts — the ones applying to income below $250,000. Both parties also oppose big cuts to the military, Social Security and Medicare, at least in the short term. Unfortunately, the deficit is likely to remain frighteningly large over the next decade without either cuts to those programs or tax increases.
Democratic and Republican leaders alike dance around this point...
It’s as if tax increases were a mere technicality in any deficit-reduction plan. In reality, finding a way to raise taxes may well be the central political problem facing the United States.
As countries become richer, their citizens tend to want more public services, be it a strong military or a decent safety net in retirement. This country is no exception. Yet our political culture is an exception. It has made most tax increases, even to pay for benefits people want, unthinkable.
This is where the Bush tax cuts come in. They have created a way for inertia to be fiscally responsible.
They are scheduled to expire on Dec. 31 of next year, not long after the 2012 election. If Republicans win the White House and both houses of Congress, they will probably extend all the tax cuts, come what may for the deficit. If Mr. Obama wins re-election and Democrats control Congress, they are likely to extend the cuts on income below $250,000.
But if Mr. Obama wins and Republicans control the House, the Senate or both — an outcome that many analysts, at least for now, consider the most likely one — things could get interesting.
You know what? I think this may be the best we could ever hope for. Indeed, it would actually be quite easy for the president to pivot from the "shared sacrifice" defined as old and sick people putting their withered skin in the game, to simply saying it's time for the whole country to ante up and pay in to save grandma. (If he wanted to, that is.)
There are reasons that the whole political establishment is having a breakdown over deficits right now but it has very little to do with their fierce commitment to fiscal rectitude. But I think things like this are important to point out.
The easiest way to reduce the deficit is to simply go back to the tax rates that were in place when George W. Bush took office.
No smoke and mirrors, no fancy "tax expenditure reform" or arcane budgeting tricks. How about we just keep it simple for now? And once we cut the deficit by doing nothing and everyone has pulled themselves together after this collective panic attack, we can all sit down and have a rational discussion about long term health care costs and fixing that little shortfall in Social Security.
First things first: do nothing. A perfect prescription for our problems.