What with the super-committee hitting the home stretch—this is the bipartisan group that needs to agree by Nov 23 on $1.2 trillion of deficit reduction—it seemed a good time to resurface a little budget history from the fertile spreadsheets of my CBPP colleague Kathy Ruffing (making these Ruff estimates…yes, I know…we’re tremendous cutups around here).
Source: CBPP analysis of CBO data.
The issue from the beginning has, of course, been the balance between new tax revenues and spending cuts. The R’s have allegedly moved a bit—see here—more on that in a moment. But the history of deficit reduction agreements shows a lot more acceptance of balance between cuts and revs, including deals under Presidents Reagan and Bush 1.
As I’ve stressed endlessly, systems can’t survive if they can’t self-correct. And political compromise is an integral component of self-correction. It greases the gears of democracy; its absence is a big reason the gears are currently jammed.
Now, some might argue that according to the WaPo link above, since the R’s are offering $300 billion in new revenues, mostly through closing some tax expenditures, they’re in the 25% range of a package that cuts $1.2 trillion.
Not so fast. I give them real credit for the offer but they taketh away far more than they giveth. Here’s what they want in exchange (from the WaPo link above):
But the tax increases would be offset by permanently extending the George W. Bush-era tax cuts past their 2012 expiration date, a move that would increase deficits by about $4 trillion over the next decade.
Um…$300 bn for $4 trillion…ouch. And yes, there are important “baseline” issues here as to whether the D’s would allow full Bush sunset, but even so, this is a lousy deal. If getting rid of the budget deficit was akin to filling up a swimming pool, they’d be be adding a cupful of water with one hand and busting a hole in the side with the other hand.
You should also factor the $900 billion of spending cuts in the first round of the Budget Control Act process, as shown in the last bar in the figure above—that cuts that 25% revenue figure by almost half.
The D’s on the committee are unlikely to make the trade here—the $300 bn in exchange for permanent Bush cuts—so we may well be heading toward supercommittee gridlock, followed by automatic cuts. That’s not democracy in action. It’s legislative dysfunction.
Update: As various bloggers have mentioned, the R’s offer actually goes further than just permanent Bush…it takes the top marginal rate down from 35% to 28%…more trickle down, less revenue, etc…this is an unacceptable deal…not even close.