Jason Peuquet, Committee for a Responsible Federal Budget:
'Do Nothing' is an Option for US Deficit Reduction
November 24, 2011
Hopes were dashed this week for bold congressional action to slow the
growth of America’s $15 trillion national debt. A special bipartisan
committee failed to agree on ways to trim the deficit by $1.2 trillion.
But if Congress has shown itself incapable of boldly addressing the U.S.
fiscal woes, consider this: current law, if unchanged, would slash
deficits by as much as $7 trillion over 10 years.
For those yearning to see a dramatic reduction in the federal deficit,
there is something astonishingly easy Congress could do.
Absolutely nothing. If Congress went on vacation for the next two years,
much would happen automatically to significantly raise federal revenues
and trim spending. An array of temporary tax cuts would expire, new
taxes would be collected, and automatic cuts to domestic and national
defense spending would go into effect. There would be additional savings
in U.S. debt-servicing costs.
All of these measures are written into current U.S. law. If those laws
hold, the Congressional Budget Office estimates the annual budget
deficit would fall from $1.3 trillion this year to the $500 billion
range for most of the next decade - a 60 percent improvement.
Some in Congress have already seized on this data. Democratic
Representative Peter DeFazio of Oregon highlights one component: tax
cuts enacted under President George W. Bush slated to expire next year.
“If Congress continued to do nothing, then all the Bush tax cuts go
away, $4 trillion of additional revenues. That would take care of 40
percent of the deficit problem over the next 10 years. If they
[lawmakers] are really concerned about debt reduction, the ‘do-nothing’
option is the best,” he said.
Independent budget-watchers say the math is correct: doing nothing would
significantly improve U.S. finances. Jason Peuquet of the non-partisan
Committee for a Responsible Federal Budget. “If Congress just went home
over the next several years, then our debt path is not nearly as bad,”
But there is a catch.
“It is really not realistic that Congress just goes home and does not
extend the tax cuts, at least part of them,” Peuquet noted.
Republicans say higher taxes would deal a damaging blow to a shaky U.S.
economy, resulting in slower growth that could reduce government
revenue. Senator Jon Kyl of Arizona. “Especially in an economic
downturn, like we are in now, it is not a good idea to raise people’s
taxes,” he stated.
Even President Barack Obama has said only the wealthiest Americans
should see their taxes go up, and only after the U.S. economy fully
recovers. Days ago, Mr. Obama urged Congress to extend and expand a
temporary cut in workers’ contribution to the federal retirement income
program, Social Security.
so much of what would transpire under current law involves added
taxation, the "do-nothing" option appeals most to progressive Democrats
eager to avoid the major spending cuts that Republicans advocate.
Indeed, all Democrats would have to do to enforce a "hands-off" approach
to deficit reduction would be to block all budget-related legislation in
the Senate, where they retain a majority. But many Democrats are also
wary of massive tax hikes.
“I think that is not a balanced approach,” Democratic Senator Ben Cardin
of Maryland said.
“That is obviously leverage to get to where we need to get to. I am for
a full balanced approach that brings down spending and allows the
revenues to be adequate to pay for our bills,” Cardin explained.
Note Senator Cardin’s use of the word “leverage” - meaning Democrats
could threaten to block tax cut extensions to pressure Republicans to
compromise on a so-called grand bargain of spending cuts and tax hikes.
His message foreshadows what could be a furious budget battle next year,
when the United States holds general elections.