Repeal Bush Tax Cuts - Solve Deficit
There was a fascinating news article, and due to its simplicity, it makes one remember the wonderful quote of Bart Simpson "He says there aren't any easy answers. I say, he's not looking hard enough!". The argument is that by simply letting the Bush tax cuts end, the deficit is nearly solved.
Now that's EASY! Congress doesn't do anything, let the tax cuts expire, and we've got our financial house back in order.
Just like the people preying on those near foreclosure, this is also a fraud!
First and foremost, Peter Orszag, who made this prediction, is basing his assumption on NO CHANGE in the expected growth of the economy that HIS department (OMB) estimated. The OMB is predicting as follows:
Those are some nice number! Hell, I could balance the budget if you let me make up numbers like that. Here's what the OMB said just over a year ago:
"CBO was projecting a 2009 baseline deficit of $207 billion. It is now projecting a baseline deficit of about $1.7 trillion. CBO itself has estimated the margin of error around its 5-year deficit projection to be about 5 percent of GDP in either direction—which means the confidence interval around the 2014 deficit is plus or minus about $900 billion." LINK
So there deficit projection in 2009 was off by over $1 trillion dollars, yet they argue in the very next sentence that their future estimates are with a margin of error of 5% of GDP (only about $900 billion). (1) Where can I get a job to predict budget deficits that are only off by +/- $900 billion? (2) Does this job pay well? (3) Do news sites like NPR actually take you seriously? Answers below
And what about those rosy growth scenarios of 2010-2013? Even IHS (which is far too rosy in its love affair of the Federal Reserve) stated last month that it expects growth to slow to 1.3% for the first qtr of 2011 budget year (November through January). LINK
Now lets tell every American family of four that earns $50,000/year that their taxes are going up $3,000/year. (LINK) Take off your partisan hat and ask yourself "Are we going to be anywhere near 4% growth in 2011?" Then ask yourself a second question "Since we're not going to be anwhere near 4% growth, what happens when the average family watches 7% of their income immediately taken away by taxes?" Forget double-dip, it's going to be a massive contraction in spending - but WORSE, there won't be enough money for the middle class to save, it will just go directly to the tax man and to make ends meet the consumer will still have to borrow.
I don't ask you to believe that extending the Bush tax cuts will make the deficit go away, but this fairy tale propogated by Orszag is nothing more than spin saying "We aren't spending too much, its just those darn Bush tax cuts!"
Do you want an easy solution? I have one, but while it's easy to say it won't be easy to get through Congress, but it will work and I'll blog about it tomorrow.
(1) You need to know someone. It's all about connections, not competency.
(3) Sadly, yes