I posted earlier on some of the economics in the updated CBO report, but I want to highlight a couple of points from my CBPP colleague Jim Horney’s analysis.
Jim stresses two points. First, “…policymakers should not let legitimate concerns about deficits and debt in coming decades prevent them from pursuing policies to boost economic growth and increase jobs in the short run.” That’s something I’ve been stressing with practically every measure of chin music I play.
Here’s something that ran over in the New Republic on that theme, and I also did a segment tonight with Rachel Maddow on the FAST! (Fix America’s Schools Today) idea that denizens of these parts know well (link; there’s no idea that everybody’s going to like, but I keep running into people who really want to see this FAST! idea get enacted).
But his second point is just as important in the longer term: the analysis in the update “…puts the lie to claims that the only way to reduce deficits and debt over the next decade is with big new spending cuts.”
As the figure shows, following current law—CBO’s baseline—does more than stabilize the debt/GDP ratio—it gets it to come down.
How can this be? Well, the next figure answers that—they main factors driving deficits over the decade covered in the report are tax cuts slated to expire at the end of next year. And sure, if they expire, you achieve that nice reversal in the debt/GDP ratio at the end of the figure above. (BTW, even with no savings from the super-committee—no agreement, no automatic cuts—the debt still stabilizes and falls by the end of the budget period if the tax cuts sunset.)
OK, back in the real world, it’s widely accepted that these CBO projections are all very “stylized,” meaning they (very helpfully) account for moving budget parts along with some expectations about where the economy’s headed. If taxes go up as planned by law, the deficit goes down a lot. But neither party is advocating that—the administration wants only the high-end cuts to sunset, the R’s want a full extension forever. The deficit reduction from the super committee may or may not materialize—no current Congress can bind the actions of future Congresses (that’s why you always want to pay the most attention to the impact of the current and maybe the next year in these agreements).
So what good is a report like this? It’s a reality check. All day long in this town you hear people from both sides of the aisle arguing that we can’t achieve a sustainable budget without whacking Medicare and Social Security. That is patently wrong by this non-partisan analysis. Such cuts are in neither of the figures above. It is true, as the second figure shows, that we can’t get there without new revenues.
Too often these days, the rhetoric of these debates is that we simply can’t pursue a jobs agenda, we can’t repair the schools, we can’t afford retirement or health care security. But that is all pure, unadulterated, shovel-ready nonsense. We have a choice.
That’s what documents like this are really about. They lay out the options and we must choose the path that best suits the needs and wants of the nation. Granted, the information is not always accessible, which is why, if I may say so, places like the CBPP are so important.
But last I checked, making informed choices about matters like these are what democracies are supposed to be about. We’ve drifted far from that goal—perhaps as far as I’ve seen in my lifetime. We need to get back there, and FAST!