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Kent Conrad: Deficit Deal Must Exceed $2 Trillion

With friends like these….

The debt-reduction package emerging in talks between the White House and congressional leaders would not “fundamentally change” the alarming rate of growth in the national debt, the chairman of the Senate Budget Committee said Tuesday.

Sen. Kent Conrad (D-N.D.) said the goal of slicing more than $2 trillion from the federal budget by 2021 falls far short of the savings needed to stabilize borrowing, reenergize the economy and avert the threat of a debt crisis.

“A $2 trillion package sounds big, but I think most serious observers would tell you that it takes a package of at least $4 trillion to fundamentally change the trajectory we’re on,” Conrad told reporters. “In the context of our debt, which is nearly $15 trillion and is headed for $25 trillion, $2 trillion over 10 years does not do the job.”

I have a $4 trillion package for you, Kent. It’s the easiest to enact, it can’t be filibustered. In fact, you could get it done with just 41 votes in the Senate. It’s called “doing nothing.” I know, it’s not sexy and it doesn’t have a masthead that says “Moment of Truth” on it or anything. But it does preserve Medicare, preserve Medicaid, preserve Social Security, preserve food stamps, preserve the EPA, preserve food safety, preserve all federal regulatory agencies, and it puts the budget on a path to medium-term primary balance. What’s more, it doesn’t take effect until the end of next year, giving the economy time to recover and the ability to increase spending in the near-term to boost demand.

I know, it’s a horrible idea, the numbers just don’t work – except the CBO tells me that they do.

If Congress lets the Bush tax cuts expire or offsets their extension, implements the Affordable Care Act as scheduled and makes or offset the Medicare cuts prescribed by the 1997 Balanced Budget Act — which CBO calls the “extended baseline scenario” — the national debt will be totally manageable. If Congress passes laws extending the Bush tax cuts without offsetting the cost, repealing the Affordable Care Act and its cost controls and protecting doctors from Medicare cuts without making up the savings elsewhere — the “alternative fiscal scenario” — the national debt will be totally out of control.

That’s it. Larry Mishel put it to me this way a couple weeks ago: if we let all the Bush tax cuts expire and return to Clinton-era tax rates, we would not have any deficit problems in this decade. “All this gnashing of teeth is all about paying for the Bush tax cuts,” Mishel told me. “It gets discussed as if it’s some historical trajectory. In the Bowles-Simpson report, there was a graph of debt to GDP. They just get to the CBO baseline in 2021!”

Now, over time, health spending becomes a problem beyond the 10-year window. And every other industrialized nation in the world has figured out how to deal with that, and they get better quality than the US at a dramatically lower cost. We could do the same thing.

But instead of all this, we’re talking about slashing discretionary spending that is already slated to go down. We’re eating our own seed corn.

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David Dayen

David Dayen

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