So here we are today, with a large structural deficit slated to increase further. Until the recent agreement on $858 billion of new tax cuts, the whiff of fiscal responsibility was in the air. The Bowles-Simpson deficit- reduction proposal garnered the most attention. It asked Americans to eat a lot of spinach, which was probably inevitable. But a number of critics have pointed out that the plan as a whole looks a bit regressive. Since so much of the deficit (though not all of it) stems from the Reagan and Bush tax cuts, does that strike you as fair?
Well, fairness is in the eye of the beholder. But here's a stunning coincidence. The entire Bowles-Simpson plan would reduce federal borrowing by $3.9 trillion over 10 years, including interest savings. That's a lot of money. In fact, it's almost enough to cover the cost of extending all the Bush tax cuts for 10 years.
So here's a choice: We can achieve nearly $4 trillion in budgetary savings by accepting everything on the Bowles-Simpson list—spinach, broccoli and all. Or we can get a bit more than $4 trillion simply by letting all the Bush tax cuts expire in 2012. Of course, ending those tax cuts would mean returning to the tax rates of the Clinton years—when, as I'm sure you recall, high tax rates killed incentives and left our economy dead in the water.
Pick your poison. And, by the way, Merry Christmas.
Friday, December 17, 2010
Today's Op-Ed by Alan Blinder hits the mark, IMHO: