Buried inside the wide-ranging blueprint put out this week by the respected co-chairmen of President Obama’s bipartisan commission to slash the federal deficit is a powerful argument for doing nothing.
The commission’s recipe of tax increases, spending cuts, elimination of popular tax breaks and reductions in Social Security and Medicare benefits continued to roil Washington on Thursday, as both liberals and conservatives condemned some of the painful steps contained in the draft proposal to reduce federal red ink over the coming decades.
But the report, offered by Democrat Erskine Bowles and former Wyoming Republican Sen. Alan Simpson, also demonstrates that Congress and Mr. Obama can take a major chunk out of the deficit without passing a single bill or issuing a single veto.
The report’s scariest deficit scenario relies on a Congressional Budget Office projection that under what it calls “current policy,” the U.S. government’s debt will soar from the current 60 percent of GDP to 100 percent of GDP by 2023 and to twice the country’s annual economic output by the year 2035.
But “current policy” as defined by CBO does — in the sometimes upside-down world of Washington — require action. It assumes that Congress will pass and President Obama will sign a continuation of at least some of the George W. Bush-era tax cuts set to expire; that lawmakers will once again vote to ease the bite of the alternative minimum tax (AMT); that Congress will block a scheduled increase in estate tax rates; and that the government will continue to pass so-called “doc fixes” to shield physicians from mandated cuts in the payments they get under Medicare.
But if none of those actions are taken — what the CBO calls the “current law” baseline — the deficit numbers look considerably brighter.
Total gridlock, in this scenario, would be a boon for the nation’s bottom line: The national debt-to-GDP ratio under “current law” would only hit 80 percent in the year 2035, compared to 200 percent under the “current policy” scenario. The national debt under the “do-nothing” plan would actually be lower through 2018 than under the painful deficit-reduction diet offered by Mr. Bowles and Mr. Simpson, although their plan’s savings rise considerably after that.
For once, however, doing nothing does not appear to be an option for lawmakers.
House Republican chief John A. Boehner of Ohio, in line to be the next speaker of the House, is insisting that the Bush tax cuts be preserved, and Republicans and the White House are haggling simply over the form of the extension.
Congress repeatedly has found ways to soften the bite of the AMT and make the “doc fix,” and is likely to do so again despite the results of the midterm election.
And staying the course could be as difficult economically as it is politically.
“Gridlock may look like a good way to reduce the deficit on paper, but it would be a disaster for business planning, investment, personal income and the things we need to have real economic growth,” said Vin Weber, a Washington lobbyist and former GOP congressman from Minnesota who served on the House Appropriations Committee.
“That’s really the last kind of policy you’d want to be laying on a fragile economy like we have now.”