On deficits

Two articles came out today in the Washington Post about the deficit. One was on the apparent agreement between the president and Congressional Republicans on a measure that would eliminate half a trillion dollars in deficit spending over a decade. The author, Ezra Klein, is rightly skeptical that this would actually get passed. Run a thought experiment and imagine one or another political actor proposes this measure. What do you think will happen next in Congress and in media outlets?

The second was on action that could be taken that will virtually eliminate the entire deficit. Or rather the inaction that could be taken. If you think Washington is good at doing nothing, you should be pleased with this prospect: if Congress does not act at all, the deficit is cut dramatically beginning in 2013. Congress must act - and the president must affirm Congressional action - in order for a variety of temporary measures to be extended. This includes the Bush era tax cuts (or Bush-Obama tax cuts, if you prefer), the Medicare "doc fix", and other tax and spending provisions. If Congress does not act, we also will see $600 billion in cuts both to the military and to discretionary spending. Taken together, if Congress and the President cannot agree to extend these provisions, the deficit nearly goes away.

For me, one of the interesting subtexts of the 2012 election will be the efforts of the Republican nominee to get Obama to pledge to extend all the Bush tax cuts (which Obama himself did previously agree to extend for 2 years, but not permanently). Whether and how Obama stands on that will, I suspect tell us a lot about what will happen in the period between the election and the end of December 2012, the time when extensions of the tax cuts would have to be in place.

In any event, I was reminded of a recent study by the Center on Budget and Policy Priorities that disaggregates the causes of the deficit. If you have a chance, have a look. It makes for interesting reading.