Doing Nothing
by David Atkins
Via Dave Dayen, James Horney of the Center on Budget and Policy Priorities has a more realistic approach to dealing with the deficit:
The projections of growing deficits and debt under current policies assume that Congress will enact laws to extend a number of current tax and spending policies that are scheduled to expire. They also assume that the Joint Select Committee on Deficit Reduction (the “Supercommittee”) will not produce $1.2 trillion in deficit reduction over 10 years and that Congress will then enact legislation to prevent the automatic across-the-board spending cuts (the “sequestration,” which is supposed to occur if the Joint Committee fails to achieve its goal) from taking effect.
What would happen, however, if Congress did not do any of those things? Deficits would be more than $7.1 trillion lower over the next 10 years, and the budget would be nearly balanced in 2021. The savings from such inaction would be:
- $3.3 trillion from letting temporary income and estate tax cuts enacted in 2001, 2003, 2009, and 2010 expire on schedule at the end of 2012 (presuming Congress also lets relief from the Alternative Minimum Tax expire, as noted below);
- $0.8 trillion from allowing other temporary tax cuts (the “extenders” that Congress has regularly extended on a “temporary” basis) expire on schedule;
- $0.3 trillion from letting cuts in Medicare physician reimbursements scheduled under current law (required under the Medicare Sustainable Growth Rate formula enacted in 1997, but which have been postponed since 2003) take effect;
- $0.7 trillion from letting the temporary increase in the exemption amount under the Alternative Minimum Tax expire, thereby returning the exemption to the level in effect in 2001;
- $1.2 trillion from letting the sequestration of spending required if the Joint Committee does not produce $1.2 trillion in deficit reduction take effect; and
- $0.9 trillion in lower interest payments on the debt as a result of the deficit reduction achieved from not extending these current policies.
Of course, one wouldn't necessarily want to leave all these things untouched. The AMT needs to be dealt with, and it increasingly constitutes a regressive tax, and repealing the Bush tax cuts on the lower and middle income brackets would constitute a regressive move (not to mention the fact that it would be politically suicidal.)
But doing even a portion of these things would make more sense in the context of real discussions about lowering the deficit, than slashing Medicare or Social Security, to say nothing of discretionary spending.
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