HAVE YOU NO SENSE OF SMELL, SIR?

8/2/11

The Republicans are doing a poor job of concealing their glee at the deal that seemingly averted the chaos that would ensue if the government defaulted on its debt if the debt ceiling weren’t raised. After all, they argue to those of us who are not so enamored with the deal (the “half-hindquartered scheme to increase the debt limit” to which I referred in my 7/30/11 post MAYBE WASHINGTON ISN’T SO BYZANTINE AFTER ALL), taxes were not raised and the discussion now centers around cutting, rather than increasing, spending.

Perhaps I am missing something here, and if I am, please point it out to me. But it seems to me that it is the Republicans who have painted themselves into a corner and have virtually assured the tax increase they claim to so vociferously oppose. Why? After the first $900 billion or so of spending cuts (most of which will occur after many members of the Congress are no longer happily toiling away at their taxpayer funded sinecures), a bi-partisan commission (A bi-partisan commission! What a unique idea! But I digress.) will decide on at least another $1.2 trillion of deficit reduction measures. If this commission can’t come up the $1.2 trillion, or pass a balanced budget amendment to the Constitution, cuts will be imposed, half on “defense” and half on domestic programs, to reach the $1.2 trillion. This doesn’t sound all that good to those of us who would really like to see government, even that government that seemingly benefits us, scaled back dramatically and thought we elected people to take, rather than pass on to a commission, responsibility for governance. But there seems to be another glaring flaw for those of us who would like to see tax increases limited to a minimum and accompanied by drastic simplification of the tax code.

The committee will be working off a baseline that assumes that the Bush tax cuts, all of them, not just the cuts for those in the top brackets, will expire. Given how these tax cuts are scored, their expiration results in an additional $3 to $3.5 trillion in revenue, depending on who is counting. So the committee assumes that revenue will increase by $3.3 trillion or so by virtue of the expiry of the Bush tax cuts and must therefore reduce the deficit by $1.2 trillion in addition to that $3.3 trillion. It will be tough enough for these pols, who make their livings spending other people’s money, to find $1.2 trillion in expenditures to cut. Finding $4.5 trillion in spending cuts, the amount necessary if the Bush tax cuts are allowed to continue (i.e., if taxes are not raised) will be well nigh impossible. Therefore, the Bush tax cuts will have to be allowed to expire, which is a somewhat more digestible way of saying that taxes will have to be raised. And the tax increase (other wording will be used, to be sure) will be done under cover of required deficit reductions. One can bet that it will not be only Democrats crying crocodile tears while protesting “I didn’t want to raise taxes, but, gee willikers, we had no choice given the restrictions of the deal made to avoid default.” Members of neither party will mention at that juncture that it will have been they who cut the deal that requires them to raise taxes.

This seems so obvious to me that I think I must be missing something. If I am wrong that the baseline from which the committee will be working assumes expiry of the Bush tax cuts, please let me know. I don’t think I am, but I’ve been wrong a few times in my life.