Again, Doing Nothing is the Best Option for Congress
Allow me to outsource the point I’ve been making since late 2010 to Matt Yglesias.
Here’s the thing you should keep in mind about the long-term deficit. Under current law, the Bush tax cuts will expire. They will expire unless a majority of House members and 60 senators and the president of the United States agree to extend them. Consequently, either 41 Democratic senators or else President Obama plus 34 Democratic senators or else President Obama plus 146 Democratic House members can ensure a large increase in federal revenue. There is absolutely no need to get even a single Republican to assent to this plan.
Absolutely everything you’ve heard over the past year or month or week about various “bargains” or deals flows from the fact that Democrats have taken this idea off the table.
I’m so old that I can remember liberals and Democrats insisting that we needed to repeal the Bush tax cuts. Not the Bush tax cuts for the wealthy, not the Bush tax cuts for those making over $250,000. The Bush tax cuts. It was a given that the vast majority of these tax cuts impacted the wealthiest Americans. Even the tax cuts at the low end helped them with their marginal income at that level. Now, if there were a real concern about the tax cuts at the low end, the time would be ripe to introduce “the Obama tax cuts” – as a supply-side stimulus measure! – to ensure that the working class and the working poor would be treated fairly. But first things first, you move revenue back to where it was in the Clinton years.
Because if you don’t, we’ve already seen that Republicans won’t agree to split the “good” tax cuts from the “bad” ones, and as a result of not wanting to “hurt the hostage,” as the President put it in December 2010, all the tax cuts will be extended. And here’s the real dirty secret. Almost every deficit reduction plan proposed by the very serious committees and panels calls for around $4 trillion in deficit reduction. As E.J. Dionne alludes to today, letting the Bush tax cuts expire, which can be done with as little as 34 Senators and the President, would increase revenue by around $4 trillion. In other words, all the deficit reduction plans, from Simpson-Bowles to Domenici-Rivlin to the Gang of Six and on and on, involve large tax cuts from current law. Doing nothing, on the other hand, would eliminate the medium-term deficit almost entirely, and return the country to a more progressive form of taxation.
It’s not just bad policy to enact large tax cuts in a purported deficit reduction measure, so the burden for deficit reduction has to fall on those collecting services, invariably the poor, elderly and sick. It’s that it’s awful politics. Republicans want low taxes over everything, Democrats seem to want an agreement over everything. The inevitable result of that is lower taxes. And even if you think that taxes need to stay the same at the low end, going about it by not allowing nature to take its course and the Bush tax cuts to expire means that you will tie the hands of any progressive reform permanently by starving the government of the revenue to fund it.
UPDATE: I am fully aware that this is the position of Michael Bloomberg. His repression of peaceful protests has gotten more attention this week.