NOTHING IS EASIER THAN DOING NOTHING…. For reasons that continue to exasperate, deficit reduction continues to trump job creation as the obsession of choice within in the D.C. establishment. There’s not much we can do about that, much to my chagrin.
Fine. If we grudgingly accept this as the political world’s central focus, the question then becomes how to reduce the deficit responsibly. With that in mind, I have good news: there’s a fairly easy way to cut the deficit in half fairly quickly.
It’s called “do nothing.”
Matt Yglesias had a good item last week, explaining the value of the “do nothing” strategy, whereby policymakers make a massive dent in the deficit, simply by allowing time to elapse.
If you don’t repeal the Affordable Care Act, don’t do a Medicare “doc fix” and don’t extend the Bush tax cuts then the medium-term deficit problem basically goes away. Most people don’t regard this as a credible policy trajectory because they think congress wants to do “doc fixes” and wants to extend at least some of the Bush tax cuts. Which is fine. But it means that all a member of congress needs to do in order to effectuate massive deficit reduction is say “I’m open to voting for doc fixes or ACA repeal or tax cut extensions, but only if they’re offset — I refuse to vote for any measure that increases the deficit.”
Those who claim to care most about the deficit don’t care for this advice at all, probably because they don’t really care about the deficit. These folks — I believe they’re generally known as “congressional Republicans” — prefer to approve policies that make the deficit worse, without even trying to pay for them, just as they did during the Bush era when they added $5 trillion to the debt.
But hypocrisy aside, it’s important to appreciate how correct Matt is about the budget arithmetic. The Center on Budget and Policy Priorities’s Robert Greenstein explained late last week:
So how then can sufficient savings be achieved in the coming decade to stabilize the debt as a share of the economy, and thereby buy us time for the reforms — especially in health care delivery and payment systems — that are the most important component of longer-term deficit reduction? There is an obvious answer to this question, which stands out when one examines the analysis of the nation’s fiscal problems that the Congressional Budget Office issued in January.
The CBO report shows that if we continue on the current policy path (including extension of all of the current tax cuts, relief from the Alternative Minimum Tax, and relief from the scheduled deep cuts in Medicare physician fees), deficits will run close to 6 percent of GDP even after the economy recovers, reaching 6.1 percent of GDP in 2021 — and the debt will climb by 2021 close to 100 percent of GDP.
Yet the data and projections in the CBO report also indicate that if policymakers simply let all of the tax cuts enacted in 2001 and 2003 (not just the tax cuts for people with incomes over $250,000) expire on schedule at the end of 2012, or if they paid for any of those tax cuts that they wish to extend with offsetting revenue increases or spending reductions — deficits would be cut nearly in half.
What’s more, as Ezra noted earlier, “[B]ecause expiration is the legislative status quo, you wouldn’t need to break a filibuster to do it. Quite the opposite, in fact: You’d need to break a filibuster in order to keep it from happening.”
Obviously we know Republicans consider this approach absolute madness, even though it was their policy that put an expiration date on the tax cuts to begin with. But the point is, it’s equally obvious that these same GOP officials just don’t have any credibility when it comes to fiscal sanity.