Relatively vague previews of the president’s big deficit speech today suggest he will tout cuts to Medicare, limits on military spending, and some sort of tax overhaul. Looking to steer away from criticism that his past budget declarations have been a tad formless, the president will likely present a detailed big ideas speech that will set up the Dems v. Paul Ryan debate likely to frame deficit discussions in the next few months.
But two interesting op-eds today are arguing for something entirely different: forget the big ideas, they argue, and do nothing.
Looking at Congressional Budget Office’s projections, the writers say that with the Bush tax cuts expiring next year, the deficit will be significantly cut in the coming decades. It will just… happen. If you let it.
Their do-nothing suggestions are of course never going to be taken up—for political reasons, Obama needs to show some muscle in his response to do-it-all Paul Ryan, a GOP golden child in the Beltway media’s eyes—but the arguments are worth hearing out.
The first comes from The New York Times’s David Leonhardt, who says that if the president wins re-election, he could very well refuse to sign any “budget-busting tax cut for the rich,” and if Republicans refused to pass a short-term extension, the Bush tax cuts would disappear on January 1, 2013. Leonhardt writes:
This change, by itself, would solve about 75 percent of the deficit problem over the next five years. The rest could come from spending cuts, both for social programs and the military.
Over the longer term—20 years—letting all of the Bush cuts lapse would close only about 40 percent of the budget gap. But 40 percent is a great start. No one is seriously suggesting that all deficit reduction should come from higher taxes. Much of it will have to come from slowing the growth rate of medical spending, which is the main cause of the long-term deficit.
He does add, however, that tax reform that dealt with closing certain loopholes would be a preferable way of handling taxes than simply letting the Bush tax cuts expire.
Economists from the right and the left—from President Bush’s tax commission and Mr. Obama’s deficit commission—favor this idea. Politicians, including Mr. Obama and Mr. Ryan, say they do, too.
The problem is that many of the biggest loopholes are politically popular. Saying you favor the vague principle of tax reform is easy. Coming out in favor of cutting the mortgage-interest deduction—or the tax exclusion for employer-provided health insurance or the corporate tax break for new machinery—is not so easy.
Ultimately, he writes, “The best hope for a solution may be the possibility that the two parties can’t agree to a solution.”
Meanwhile, over at Slate, business and economics reporter Annie Lowrey is putting forth much the same argument, advocating for what she calls Slate’s “Do-Nothing Plan for Deficit Reduction.” The plan? “Leave everything as is. Current law stands, and spending and revenue levels continue according to the Congressional Budget Office’s baseline projections. Everyone walks away. Paul Ryan goes fishing. Sen. Harry Reid kicks back with a ginger ale. The rest of Congress gets back to bickering about mammograms. Miraculously, the budget just balances itself, in about a decade.”
Ah, the soothing temptation of a ginger ale.
Take it from the number crunchers at the CBO. Look at the first chart here, and check the “primary deficit” in 2019. The number is positive. The deficit does not exist. There’s a technicality, granted: The primary deficit is the difference between spending and revenue. The total deficit, the number more commonly cited as “the deficit,” includes mandatory interest payments on the country’s debt. Even so, the total fiscal gap is a whisper, not a shout—about 3 percent of GDP, which is what economists say is healthy for an advanced economy.