Some deficit real talk
Sean West, a policy analyst at the Eurasia Group, just sent along a research brief his firm produced on the likelihood of a deficit deal before the 2012 election. Bottom line: It’s not likely. It’s particularly not likely if you’re looking at the sort of multitrillion-dollar megadeals produced by the Fiscal Commission, Paul Ryan and the White House. The likelier outcome are a few cuts and tax hikes backed up by some sort of procedural threat — say, a debt target that imposes automatic cuts if we’re not on track by 2014 — that makes future deficit deals more likely.
The report’s key insight is that deficit reduction usually gets broken into pieces. “None of the major deficit deals in recent decades has subtracted more than $500 billion from the cumulative deficit over a five-year period,” the authors note. When Ronald Reagan had to reduce the deficit, he raises taxes multiple times over a course of years and spearheaded a separate effort to reform Social Security. In the 1990s, there were three separate deficit-reduction bills: George H.W. Bush passed one in 1990, and Bill Clinton passed follow-ups in 1993, 1995 and 1997.
The wish for a grand bargain that’ll take care of the deficit all at once is probably just that: a wish. The likelier outcome is a slew of deficit-reduction measures passed over the next decade or so. That’s even truer for health-care spending, which is both the biggest fiscal problem we face and the one that most requires a decades-long process of trial-and-error in which we test out new ways of delivering care, of paying for care, of separating useful treatments from useless ones and of modernizing the sector’s IT infrastructure.
Finally, the report has a particularly cool table offering an apple-to-apples comparison between the three deficit reduction bills passed in the 1990s and the Obama, Ryan and Simpson-Bowles proposals. It’s too big to embed, but you can view it here.