The Simple Way Off This Budget Cliff

By @KYYellowDog

So Our Hero is running for her life through the jungle with a pack of hungry jaguars chasing her. Suddenly she comes to the edge of a cliff, with a thousand-foot drop onto jagged rocks below. The jaguars are almost on top of her - quick, choose! Torn to shreds or broken to pieces? Either way, she's dead.

TO BE CONTINUED AT NEXT SATURDAY'S MATINEE.

Next week: Our hero is back in town, sporting a black fur coat and looking none the worse for wear. What happened? She escaped, of course. Silly question.

If only budget problems were are simple as old-time movie serials. Guess what? They are.

David Dayen at Firedoglake:

The Congressional Budget Office is out with their economic projections for the fiscal cliff. They pretty much match Goldman Sachs’ prediction from last week, but these are the numbers Congress is likely to parrot for the next 6 months, so we’d better take a look.

CBO projects that $607 billion in deficit reduction items are at stake at the end of 2012, when various tax and spending measures expire. Because the cuts will begin at the beginning of the calendar year and not the fiscal year, we’re talking about a substantial cliff:

Most of the policy changes that reduce the deficit are scheduled to take effect at the beginning of calendar year 2013, so budget figures for fiscal year 2013—which begins in October 2012—reflect only about three-quarters of the effects of those policies on an annual basis. According to CBO’s estimates, the tax and spending policies that will be in effect under current law will reduce the federal budget deficit by 5.1 percent of GDP between calendar years 2012 and 2013 (with the resulting economic feedback included, the reduction will be smaller).

When they refer to economic feedback, CBO means that federal revenues will shrink as a result, because economic growth will be stunted and unemployment will rise. In fact, CBO predicts a recession for the first half of 2013 if all the items on the fiscal cliff are allowed to go through.

SNIP

CBO sets this up as a choice: risk a recession in the first half of 2013, or risk a larger debt crisis down the road. Those are not the only alternatives.

For example, letting the Bush tax cuts expire and then coming back with a different set of “Obama tax cuts” could reshape the tax code to promote a healthy middle class, while taking in more revenue. Eliminating tax cuts at the high end would hardly affect growth to any real degree; Jared Bernstein puts it at about $24 billion in “foregone stimulus” for 2013, and I think the number could be lower; you’re talking about tax cuts that largely are going into bank accounts, which for the truly wealthy should not impact their spending whatsoever. The key about a tax cut expiration policy is that it’s not like the fiscal impact of expiration starts pounding within a week; you could design a retroactive policy, where the Bush tax cuts are dead and buried and pressure is put on Republicans to pass a new round of tax cuts to avoid recession.

It's even simpler than that - restore all the non-defense spending while letting the tax cuts die and keeping the defense cuts. Domestic spending grows the economy; tax cuts hurt it and current defense spending is stupendously wasteful.

No, of course repugs won't accept it. But nothing has to be done before the election, so dems should Shut. The. Fuck. Up. about making a deal nownownow when there's no crisis and it may never be needed anyway.

As Digby put it in a critique of the Kill Social Security and Medicare "Grand Bargain":

You either believe in stimulus or you don't. If you do, borrow the money at very cheap rates and hire a bunch of people to do something. When the economy gets going again and people are working and paying taxes, then raise taxes to pay down the cheap loans, if that's even necessary.

This endless haranguing about deficit projections long into the future, even if it is "combined" with another inadequate stimulus, is in service of one thing and one thing only --- dismantling the sad remnants of the American welfare state once and for all. We know this because the whole argument is riddled with lies and misconceptions --- and fabulously wealthy celebrities like Tom Friedman are either too uninformed to understand this or are in on the con. Either way, they are accomplices to a great crime that's being perpetrated by the American people.

So far, Americans of both the left and right, for very different reasons, have come to the common sense conclusion that none of the elites can be trusted and it's better if these people do nothing at all than enact this plan. More power to them.