Let’s just stipulate something for the record. If the Congressional Budget Office were asked to step in and score John Boehner’s “Plan B,” it would score as an increase to the deficit by about $4.9 trillion over ten yeas. If CBO scored the Obama plan, it would score as an increase to the deficit by about $4.1 trillion over ten years. That’s because current law dictates that America goes over the cliff and stays there. It doesn’t contemplate any changes to the law. And if America went over this cliff, the resulting austerity would be so great that it would swing the economy into recession. It would also virtually wipe out the long-term deficit gap, even while it would probably increase it a bit in the near term, because of increases in automatic stabilizers. But over the long-term, the deficit would essentially be wiped out.
The fact that everyone in Washington, everyone on Wall Street, every economic analyst in America is freaking out over this possibility should tell you what you need to know about the importance of reducing the deficit. Both sides are trying their best to cut taxes from current law to avoid the near-term consequences of austerity. The debate comes from whether to cut taxes by $4.1 trillion or by $4.9 trillion. Both sides basically want to keep the spending cuts from the 2011 debt limit deal relatively intact, just shifting it around a bit.
The CBO also publishes an “Alternative Fiscal Scenario,” where they try to guess at what policies will get extended and what policies won’t. But that’s nonsense. They might as well consult a fortune teller. CBO’s job is to explain the consequences of current law and proposals to alter it. If they were honest, they would explain that Congress and the White House are currently negotiating over how much to increase the deficit.
This article covers a lot of this same ground. But it focuses on the case for doing a deal in January. I’m trying to explain the case for telling “deficit hawks” to shut their damn mouths. They’ve been exposed by this entire process as complete cowards, unable to deal with the consequences of their own rhetoric. They’ve demanded, in the most apocalyptic terms imaginable, a “deal on the debt” that led to the political construction of this cliff, which nobody can seem to figure out how to avoid. There’s nobody more responsible for the economic hardship in the aftermath than the likes of Pete Peterson and Maya MacGuineas. And the sad thing is that they won’t feel it. They’re incomparably wealthy, and they won’t face any challenges if a recession CAUSED BY THEIR ACTIONS hits. It’s the average working man and woman who will suffer.