Sit Tight

How Congressional Inaction Could Cut the Deficit by Trillions

Here is a surefire way to cut $7.1 trillion from the deficit over the next decade. Do nothing.

That's right. If Congress simply fails to act between now and January 1, 2013, the tax cuts passed under President George W. Bush expire, $1.2 trillion in additional budget cuts go through under the terms of last summer's debt-ceiling deal, and a variety of other tax cuts also go away.

Knowing this, are you still sure that a "failure" by the congressional supercommittee to reach a deal would be such a disaster?

In an ideal world, of course, reasonable members of Congress could agree to a balanced package of long-term spending cuts and tax increases to begin bringing the deficit down, coupled with short-term measures to boost the economy.

But genuine compromise can't happen because Republicans refuse to accept any significant tax increases. This is not a partisan statement. It is just a description of the facts. It is maddening that the media are so desperate to avoid being attacked as "liberal" that they cannot describe the situation as it is.

Democrats have put huge spending cuts on the table -- and keep offering more and more and more. All the Democrats ask in return is that the cuts be balanced by some revenue.

By rejecting their offers, Republicans induce Democrats who are anxious for some deal -- any deal -- to keep coming their way. The Republican approach is wrong and irresponsible but brilliant as a negotiating strategy. As my Washington Post colleague Ezra Klein wrote this week: "Over the past year, Republicans have learned something important about negotiating budget deals with Democrats: If you don't like their offer, just wait a couple of months."

Finally, the Republicans decided they needed to look slightly flexible. So they came up with $300 billion in supposed revenue from a promised tax reform in a plan that also included a proposal to slash tax rates for the rich. There is a lot more tax cutting here than revenue. Rep. Jeb Hensarling (R-Texas) the co-chairman of the supercommittee, who said on Tuesday that this was GOP's final offer, reversed field Wednesday afternoon declaring himself open to other ideas.

Even Democrats inclined to capitulate know how shameful agreeing to such a deal would be. And mainstream, centrist deficit hawks should be grateful if a deal on such terms is killed. What Republicans want to do in effect is to make at least 90 percent of the Bush tax cuts permanent. This would only make deficit reduction even harder in the future.

That's where the do-nothing strategy comes in. Championed early this year in the New Republic by New York magazine writer Jonathan Chait, it looks even better now because of the spending cuts scheduled to go through if the supercommittee doesn't act.

Already, Hensarling is suggesting undoing the promised defense reductions. Here is an opportunity to challenge the fake deficit hawks among conservatives: If that military spending is so important, why are they not willing to ask wealthy Americans to finance it with slightly higher taxes?

The prospect of $7.1 trillion in tax increases and some cuts that would begin taking effect in January 2013 (thanks to Jim Horney of the Center on Budget and Policy Priorities for walking me through the math) should hearten every deficit foe now prepared to mourn a failure by the supercommittee.

Because the bulk of the $7.1 trillion comes from automatic revenue increases, the power in future negotiations would shift toward those seeking a balance between cuts and taxes. Doing nothing is not an option when it comes to job creation. Congress still needs to act. But on the deficit, inaction now could lead to wiser action later.

Yes, this strategy works better if President Obama is re-elected. Yet if Republicans take over the whole federal government in 2012, it should fall to them to enact the draconian cuts required to protect the wealthiest Americans from tax increases. No moderate or progressive should want to be complicit in this.

A balanced deal would be nice but it's now impossible -- and not because of some vague congressional "dysfunction" the media like to talk about. Sane fiscal policies are blocked because one party refuses to accept the need to roll back the excesses of the 2001 and 2003 tax cuts. If Congress does nothing, those tax cuts go away. That's why a "failure" by the supercommittee to endorse a deeply flawed deal is actually a victory for sensible deficit reduction. 

(c) 2011, Washington Post Writers Group

About the Author

E. J. Dionne Jr. is a syndicated columnist, professor of government at Georgetown University, and a senior fellow at the Brookings Institution. His most recent book is Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent (Bloomsbury Press).

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The 2012 campaign will reveal the true tax structure...Wait till we find out how much 'unemployed' Romney pays in tax. We know already the un employed pay no Soc Sec, no unemployment tax, no medicare..... and pay capital gains and dividends at 15% at most. And then there is the 'carried interest' scam.. OWS should forget tents and march on WS or US Capitol  with... TRANSACTION TAX NOW

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