Thursday, November 17, 2011

Do nothing and fix the deficit

Here we are less than a week before the deadline for the Supercommittee to come up with $1.2 trillion in budget cuts, or else! Few people in and around Washington are holding out much hope for the partisan committee to agree on cuts that will prevent automatic, across-the-board spending cuts. This column by E.J. Dionne offers a different — and far more effective — solution: Simply let the Bush tax cuts expire and go back to the tax rates in place 11 years ago.

It seems like a different universe but was only just over 10 years ago. The Clinton presidency closed out with a budget surplus and a projection of budget surpluses as far out as budget writers could project. The U.S. Treasury would be flush with money. President George W. Bush pushed a solution to the budget surplus problem: Reduce taxes. His argument was that the government was taking in more money than it needed. Unless taxes and revenues were cut, he argued, Congress would just spend that excess revenue in worthless ways. I admit that I found the argument at least a little appealing at the time.

But guess what — it's no longer early 2001. We no longer have a budget surplus. We have a $1.4 trillion deficit. Even if the Supercommittee succeeds beyond expectations and enacts a $4 trillion budget cut over 10 years, the federal deficit will increase because we'll be cutting only $4 trillion from a 10-year cumulative deficit of at least $14 trillion. Doing nothing — letting the Bush tax cuts expire and tax rates rise to their 1990s level (a time of great economic growth, by the way) — is a far more effective and fairer way to reduce the federal deficit and debt. Yes, it would require sacrifice by all taxpayers, and sacrifice is a word that has disappeared from political discussions, but if we're going to correct our budget mess, we will have to sacrifice, like it or not.

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