It almost seems hard to believe now, but a mere dozen years ago Washington was arguing over how best to handle the nation's budget surplus. That didn't last long, of course, and the last two years have seen protracted battles and absurd brinksmanship over how we're going to solve our terrible budget deficit. Well, good news, says Richard Kogan at the Center on Budget and Policy Priorities (CBPP), a Washington think tank: Thanks to the recent fiscal cliff deal (ATRA) and the 2011 Budget Control Act (BCA), we're only about $1.4 trillion away from putting our fiscal house in acceptable order:
Those two laws have already cut our 10-year deficit by $2.4 trillion, apparently while nobody was looking, and according to Kogan's analysis, cutting another $1.4 trillion by 2022 would stabilize our debt-to-GDP ratio at 73 percent, says Suzy Khimm at The Washington Post. That wouldn't solve all our fiscal problems, but the CBPP believes a 73 percent debt-GDP ratio "will be enough to ward off the potential negative consequences of excessive debt: Crowding out domestic investment and prompting international credit markets to turn against the United States."
And hey, $1.4 trillion over 10 years "is really not a huge amount of money," says Kevin Drum at Mother Jones. "If we split this equally between spending cuts and tax increases, we need about $600 billion of each," or $60 billion a year, with the other $200 billion coming from interest savings. Even our polarized Congress can manage that. Or, says Khimm, Congress could solve our fiscal problems by doing... nothing.
The CBPP's baseline doesn't assume that the rest of the sequester will take effect or that Congress will have paid for a Medicare doc fix. So if Congress either let the $1.2 trillion sequester happen or replaced it with equal amount of deficit reduction, it would need just $200 billion more in deficit reduction to achieve the CBPP's target.... Either way, legislators wouldn't have to do that much more than solve the sequester — or just do nothing and let the rest of the sequester take effect — to reduce the deficit to the CBPP's satisfactions. [Washington Post]
So, viva la gridlock? Maybe not. "Hawkish critics will argue that a 73 percent debt-to-GDP ratio is too high," says Khimm. The IMF and EU set an optimal target of 60 percent, for example. And "deficit owls believe that such targets (or any targets at all) for deficit reduction are arbitrary and end up hampering growth through austerity." Well, it's true that "the painless and most effective solution to the deficit is additional growth in GDP," says Walter Hickey at Business Insider. But cutting or taxing our way to a stable rate of debt increase would put the U.S. "in an exceptional position moving forward."
What a bunch of wet blankets, says Paul Krugman at The New York Times. The big takeaway from this report "is surely that for the next decade, the debt outlook actually doesn't look all that bad."
True, there are projected problems further down the road, mainly because of the continuing effects of an aging population. But it still comes as something of a shock to realize that at this point reasonable projections do not, repeat, do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting. So you heard it here first: While you weren't looking, and the deficit scolds were doing their scolding, the deficit problem (such as it was) was being mostly solved. Can we now start talking about unemployment? [New York Times]
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