Commenting on the end of the Super Congress, Ezra Klein writes:
The Center on Budget and Policy Priorities estimates that if Congress simply does nothing for the next few years, the fiscal picture will improve by about $7.1 trillion over the next 10 years. About $4 trillion of that is the expiration of the Bush tax cuts. An additional $1.2 trillion comes from the trigger that kicks in when the supercommittee fails. Some Medicare cuts, the expiration of stimulus programs and lower interest payments account for most of the rest. Our projected deficits look so large only because we expect Congress to pursue these policies without paying for them.
Obama could simply say “no” to this: He could say he plans to veto any non-emergency proposals that increase the federal deficit.
Let’s set aside, for a moment, the fact that our “much discussed deficits” do very much exist already ($1.3 trillion in 2011 alone according to CBO estimates). Ezra is correct that, if Congress did nothing, and current law was implemented as written, then our deficit would be cut by $7.1 trillion over the next ten years.
The problem is that Congress, even this “do nothing” Congress, can’t be trusted to do nothing.
Every year, even years with high levels of partisan rancor, Congress gets together and passes a slew of temporary tax cuts that add the deficit. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was no different. In December of last year, Congress passed, and Obama signed, an $800 billion package of tax cuts including $186 billion in extending the current tax rates for individuals, $136 billion in AMT relief, $111 billion in payroll tax cuts, over $100 billion in investment incentives, $68 billion in death tax relief, and $53 billion in capital gains cuts. Add in $56 billion in unemployment insurance spending and Congress added $857 billion to the deficit in just one day. And that doesn’t even count the $19 billion they spent on the doc fix earlier that month.
While the individual and capital gains rates are set to last through 2012, the AMT patch, payroll tax cut, doc fix, and unemployment insurance are all set to expire at the end of this year. Any bill that extends them for just another year, would add hundreds of billions to the deficit. And with the U.S. economy teetering on the brink of another recession, Obama does not want to hike any of these tax cuts or cut any of this spending . In fact, he was campaigning for the payroll tax cut today. An Obama threat to veto any bill that adds to the deficit simply has no credibility.
Neither do Democrat threats to let the Bush tax cuts expire. Yes, reverting to the Clinton tax rates would increase revenues by $3.7 trillion. But the Bush tax cuts were far more progressive than progressives like to admit. Only $680 billion of that tax hike would fall on the wealthiest 2% of Americans. Obama, in essence, would be threatening to raise taxes on the 98% by $3 trillion. Again, that is not a credible threat.
So yes, Congress could reduce the debt by $7.1 trillion by doing nothing. But no believes they have the political to do it.
