But there’s another other big problem here. The Wall Street Journal has a long history of editorializing in favor of deficits and against balanced budgets. As it said a couple of years ago, “We’ve long argued that deficits per se are not worth losing sleep over.” It somehow forgets all about that here.
In other words, the deficit doesn’t have to go to zero, according to everything the Journal has ever said. Presumably the Journal doesn’t see the need for deficits to go below 2.9 percent of GDP, since that was the lowest number their hero Ronald Reagan posted in his eight years in office.
So here’s the Congressional Budget Office on what deficits look like as a percentage of GDP under both current law and the proposed Obama budget (click for a larger chart):
Under current law, the CBO projects deficits beginning next year of 6.9 percent, 4.2 percent, 3 percent, 3 percent, 3.3 percent, 2.9 percent, and 2.8 percent. It projects the Obama plan’s budget deficits at 7.4 percent for next year, and then 5.5 percent, 4.4 percent, 4.1 percent, 4.4 percent, 4.3 percent, and 4.3 percent thereafter.
Here are Reagan’s budget deficits from 1983 to 1988: 6 percent, 4.8 percent, 5.1 percent, 5 percent, 3.2 percent, and 2.9 percent.
Raising taxes on the top 1 percent back to pre-Reagan levels would drop the baseline and Obama budget deficits by roughly 1.2 to 1.3 percentage points of GDP per year (and presumably more, as income at the top has tended to rise far faster than the economy as a whole), putting both well below Reagan-era levels through 2020.
After that, Medicare costs have to be reined in or the deficits explode. Nobody I’ve seen questions that. The dispute is over how to do it.
Remember, these are just projections. The actual numbers will play out differently. But this is what we’ve got to work with now.
The bottom line: contrary to what the Journal says, raising taxes significantly on the top 1 percent would indeed make a significant dent in future deficits. Raising taxes less on the top 5 percent to 10 percent or even the top 25 percent, would narrow deficits even further. And that’s without even considering spending cuts.
We could work full time just picking apart the misleading stuff or outright falsehoods on the Journal edit page, but we’d go insane. As Chait says:
There’s always a problem involved in wasting one’s time examining very bad arguments. But organs like the Journal editorial page — which just won a Pulitzer Prize! — are influential and prestigious. I think very few people realize that these people are just pure clowns. They’re not messing up complex economic theories here. They’re messing up basic arithmetic.