With the death of the super-committee and the ignoring of the Bowles-Simpson Commission report, it is obvious that treading water is now the operative mode for both President Obama and the Republican House when it comes to managing our nation’s dire deficit and debt course.
The Congressional Budget Office has looked at this nonfeasance approach and highlighted where, hypothetically, it will lead: to massive tax increases and massive spending cuts — especially in defense — resulting in massive reductions in the deficit.
Under CBO assumptions, when both the Bush tax rates end and the sequester takes effect at the end of the year, the result will be that the debt added over the next 10 years will be reduced from a projected $11 trillion to about $3.7 trillion. This would take the debt-to-GDP ratio, the key predictor of financial solvency for the nation, to a manageable number and annual deficits to less than 3 percent of GDP.
This represents a truly staggering change in debt projections for the nation, which is presently on a Greece-like track.
The only problem with these numbers — other than the effect of such a massive tax increase and cut in our defense capability in a very dangerous world — is that they come out of fantasy. Everyone knows these types of adjustments are not going to happen, but the law requires it, and so CBO must score it as a realistic scenario.
What CBO is suggesting is that Congress and the White House would allow for the Alternative Minimum Tax to include approximately 30 million more people than it currently does in its punitive tax bracket, for doctors to see their Medicare reimbursements reduced to the point where they would essentially be paying the government to see patients and for a jump in the tax bill, not only for the richest Americans but essentially for everyone who pays income tax. Even in a time of a somnambulant presidency and Congress, it is difficult to believe these public policies will go forward.
So, what is going to happen and when?
How does a Republican House come to terms with its own self-inflicted contradictions, where it has set up a structure where taking no action leads to massive debt reduction (the stated goal of the Tea Party) through the unacceptable policy of triggering huge automatic tax increases and defense cuts?
How does a president who is determined to grow the government in healthcare, social welfare and equitable tax policy (“equitable” being defined as taxing the rich and expanding the number of people who take from the government) deal with automatic actions that, if executed, make it impossible to accomplish those purposes?
Is the Republican House really willing to accept massive debt reduction at the price of huge tax cuts and steep cuts in defense while still allowing the government to expand? That is a classic case of the ways not justifying the ends.
Who flinches, or to put it more appropriately, who and how do the folks in Washington turn off the autopilot and start to govern again? Any effective action is going to have to involve both sides, because both sides have dug themselves into a deep hole.
The problem is that in a presidential election year it is difficult to see how positive and constructive bipartisan action can occur, especially on big issues such as how to address the end of the Bush tax rates and how to deal with a $1.5 trillion sequester. Both play into too many of the primal issues that will drive the election debate.
If little can be expected to abate the impending autopilot events that will kick off 2013 with disastrous consequences, then why not take some lesser, politically possible steps that at least show the country’s citizens that those elected to govern actually understand that is their job?
Some constructive action in areas such as energy, immigration and corporate tax reform would go a long way toward setting up the framework for post-election action on the adjustments that would be forced by autopilot.
More importantly for those running for reelection when voters are developing an obvious distaste for incumbents, it would show that Washington is capable of addressing important issues that affect our future even if they are not the ones at the center of the election debate.
Start “medium” and work up from there. It would be refreshing change and maybe lead to bigger things being done correctly.
Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations subcommittee on Foreign Operations. He also is an international adviser to Goldman Sachs.