Tuesday, August 2, 2011

A question for my readers, continued [and now updated]

Here's a slightly more systematic way of looking at what I'm saying in the previous post.

Here are the four potential outcomes given two variables -- the expiration or extension of the Bush tax cuts, and the acceptance or rejection of the deficit committee's plan to cut $1.5 trillion from the CBO baseline.

Tax cuts expireTax cuts extended
Committee cuts accepted$1.5 T targeted cuts$3.5 T+ targeted cuts
Committee cuts rejected$1.2 T across-the-board cuts$1.2 T across-the-board cuts

Now, assuming the tax cuts expire, the committee's cuts are probably more acceptable to Democrats than the cuts mandated by the trigger. (Although they'll be larger, they'll also -- hopefully -- be targeted in such a way as to avoid serious economic damage.)

But what happens if the Bush tax cuts are extended? Suddenly, the trigger seems by far the better option. There's simply no way to structure over $3 trillion in spending cuts so that they're more acceptable to liberals than $1.2 trillion in spending cuts, particularly if half of the latter figure comes from military spending. In other words, if the Bush tax cuts are extended, the trigger probably fires, no matter what.

And the Republicans, knowing this, would be forced to choose between preventing $600 billion in cuts to the military and the extension of the Bush tax cuts. Many would certainly choose the latter, but their incentive to preserve the tax cuts would be, at the least, reduced somewhat.

Of course, there's a third possibility: nobody in Congress wants to sunset the tax cuts or to accept military cuts, so they vote to dismantle the trigger instead. The deficit would continue to rise as expected, but for the exact same reason it's always risen: nobody in Congress actually cares about the deficit as much as they care about cutting taxes or preserving spending.

So tell me: how am I wrong about this?

Update: My brother just messaged me to tell me exactly why I'm wrong -- I've botched the timing. The debt commission's plan is due this year, before the tax cuts expire. Which means that so long as no one tries to extend the tax cuts before the debt commission rolls out it's plan, the trigger will become irrelevant long before anyone starts worrying about taxes. So, uh, just ignore the last two posts, I guess.

1 comment:

  1. Writing your third blog post ever about how you will never delete blog posts is starting to look a little short-sighted