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To Deficit Scolds, We Always Need to Cut $4 Trillion

Brian Beutler notices that the “taxes on the rich” that President Obama’s Administration suggested yesterday to pay for the American Jobs Act weren’t really taxes on the rich, but a tax trigger that would only set off if the Super Committee didn’t come up with $450 billion to pay for the job measures in the bill. This is something I covered yesterday in two posts. In addition to the pay-fors in the bill, at the very end there’s a section which says that those pay-fors would be eliminated if the Super Committee finds another $450 billion above the minimum target of $1.2 trillion in deficit reduction solutions.

So really, the jobs bill could be paid for by anything; the measures put into the American Jobs Act are merely suggestive. This creates a tax trigger, accompanying the already-existing trigger of defense and discretionary cuts as a consequence for inaction.

Alan Simpson and Erskine Bowles held a press conference for Washington villagers yesterday where they pronounced that the $1.2 trillion minimum target for the Super Committee was “peanuts.” But I want you to notice something:

The “supercommittee” doesn’t have an enviable job. Tasked with finding $1.2 to $1.5 trillion in savings, many have predicted certain failure for the deficit-reduction squad. But for Alan Simpson and Erskine Bowles, the bipartisan group needs to set its sites even higher. Congress has agreed to $900 billion in cuts under the debt-ceiling deal Finding an additional $1.2 trillion is “peanuts,” said Simpson, a former GOP senator. To achieve any real deficit reduction, the committee needs to identify at least $4 trillion in savings, they said at a Monday news conference.

Emphasis mine. Why do I point out the $4 trillion number? Because that was the initial deficit reduction, approximately, from the Bowles-Simpson recommendations on the original Catfood Commission. But a lot has changed since then. There was an appropriations deal for FY2011 that cut spending. The debt limit deal already put in motion an additional $900 billion. If you look at CBO’s latest estimate, since the January 2011 analysis, deficits have reduced by over $3 trillion. That admittedly counts the $1.2 trillion minimum from the Super Committee. But even stripping that out, you can see that Congress and the President have already achieved $2 trillion in deficit reduction. And yet we STILL need $4 trillion, according to Statler and Waldorf Bowles and Simpson.

Because we’ll ALWAYS need $4 trillion. Without that big and urgent a need, you cannot cut things like Social Security or Medicare. You cannot acknowledge the deficit reduction that’s already taken place. You cannot acknowledge the fact that doing nothing would bring the medium-term deficit almost entirely into balance. You cannot acknowledge that the debt situation is trivial relative to the jobs crisis. You must only repeat $4 trillion, $4 trillion, $4 trillion over and over again like a mantra.

Simpson actually managed to mention that there’s a crippling jobs crisis in the country:

Neither Simpson nor Bowles signed off on Obama’s plan, but they both acknowledged that fiscally responsible investment in education, infrastructure, and research could be warranted to help the country’s current economic crisis. “You have to know there’s a fragile economy, you have to recognize that,” said Simpson. As for Obama’s own jobs plan, he added: “As long as he pays for it, that’s fine with me. He can do anything he wants.”

He couldn’t bring himself to say that job creation is the biggest deficit reducer there is, or that you cannot have deficit reduction on the order they seek with 9% unemployment unless you consign a subset of the country to mass suffering, or that the biggest need right now is higher deficits to goose demand. But that would require a dose of reality.

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David Dayen

David Dayen