Audit Notes: Main Street Corp., The Do-Nothing Deficit Fix, Hugh Grant

The Wall Street Journal runs a banner headline across the top of page one that says:

Risk Rule Riles Main Street

U.S. Wants Car Makers, Brewers to Back Derivatives Bets With Cash; Cost at Issue

Really? You mean ma and pa are up in arms about the derivatives provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act? Sounds fishy!

Who are these “Main Street” denizens the WSJ says are so riled up. In order: Caterpillar Incorporated, MillerCoors LLC, Ford Motor Company, FMC Corporation (a Philly chemical company), Boeing Company, Duke Energy Corporation, and Procter & Gamble Company.

I’ve said it before:

I don’t know anybody who thinks the corporate interests of BP or Philip Morris (okay, Altria), say, are the same as those of regular Americans and small businesspeople.

Just because something isn’t Wall Street, doesn’t mean it’s Main Street.

Annie Lowrey and David Leonhardt both hit on one way to fix budget deficits: Do nothing.

Under current law, we’ll be back to 3 percent of GDP by 2019 if we just stick with current law. Lowrey shows how:

First, doing nothing means the Bush tax cuts would expire, as scheduled, at the end of next year. That would cause a moderately progressive tax hike, and one that hits most families, including the middle class. The top marginal rate would rise from 35 percent to 39.6 percent, and some tax benefits for investment income would disappear. Additionally, a patch to keep the alternative minimum tax from hitting 20 million or so families would end. Second, the Patient Protection and Affordable Care Act, Obama’s health care law, would proceed without getting repealed or defunded. The CBO believes that the plan would bend health care’s cost curve downward, wrestling the rate of health care inflation back toward the general rate of inflation. Third, doing nothing would mean that Medicare starts paying doctors low, low rates. Congress would not pass anymore of the regular “doc fixes” that keep reimbursements high. Nothing else happens. Almost magically, everything evens out.


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.

In other words, simply returning to Clinton Boom Era tax rates would solve most of the medium-term deficit problem—with no need for Paul Ryan-style financial shenanigans.

That’s unlikely to happen, but it sure puts this World Is Going To End deficit debate in a different light, doesn’t it?

— You’ll not read a more-fascinating piece this week than this investigation by the actor Hugh Grant. Really!

Grant secretly taped a conversation he had Paul McMullan, a whistleblower in Murdoch’s News of the World scandal who hacked people’s phones for various papers, and McMullan drops a lot of information.

Here’s one snippet (remember that Divine Brown was the hooker Grant got caught with in the 1990s):

Me Do you think Murdoch knew about phone-hacking?

Him Errr, possibly not. He’s a funny bloke given that he owns the Sun and the Screws … quite puritanical. Sorry to talk about Divine Brown, but when that came out … Murdoch was furious: “What are you putting that on our front page for? You’re bringing down the tone of our papers.” [Indicating himself] That’s what we do over here.

Me Well, it’s also because it was his film I was about to come out in.

Him Oh. I see.

Me Yeah. It was a Fox film.

Read the whole thing. (h/t Felix Salmon)

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,