PAYGO. The way to eliminate medium-run budget deficits is to reinstate and then enforce strict pay-as-you-go rules. That’s all. Brad Plumer notes that Congress could avoid high deficits by doing nothing, but I think that’s misleading. First of all, Congress can never literally do nothing; it has to pass appropriations bills every year, at the very least. But more to the point, there’s widespread agreement on most of the things that Congress wouldn’t pass if they really did nothing. There’s a consensus that the “doc fix” to maintain Medicare doctor reimbursement rates and the “AMT fix” to prevent middle class taxpayers from being subject to the alternative minimum tax should be passed. While not at consensus levels, most Democrats and all Republicans appear to support extensions of most of the Bush-era tax cuts, and Republicans support extension all of those cuts. To “do nothing” is possible, but it would entail several significant policy changes that no one wants.
However, it’s easy to phrase Plumer’s point another way: Do whatever you want, but just pay for it. That’s what the budget hawk position should be. Want AMT fix? Fine; what spending cuts or tax increases do you want to pay for it? Doc fix? Same question. Really, however, as Plumer shows using charts from Michael Linden, the real story here is the Bush-era tax cuts. Same question, however. The budget can certainly afford those cuts, either in Obama’s partial version or the GOP’s full one, as long as there are equal offsets.
The medium-term budget deficit is all about the choice Congress is making to do all of these things without paying for them. That’s it. “Do nothing” is cute, but it’s not realistic. PAYGO is perfectly realistic and, if used, it works just fine. The fact that no Republican, and few Democrats, are advocating paying for tax cuts into the future shows you just how seriously any of them take actual deficit reduction.