The do-nothing plan: now worth $7.1 trillion
In the past, I’ve talked about the “do-nothing plan” for deficit reduction: Congress heads home to spend more time with their campaign contributors, and the Bush tax cuts automatically expire, the 1997 Balanced Budget Act’s scheduled Medicare cuts kick in, the Affordable Care Act is implemented, and the budget moves roughly into balance. It’s not an ideal way to balance the budget, but it helps clarify that the deficit is the result of votes Congress expects to cast over the next few years. If, instead of casting those votes, they do nothing, or pay for the things they choose to do, the deficit mostly disappears.
The last few years have added new elements to the do-nothing plan: the trigger, for instance, and various temporary tax cuts Congress has been extending. James Horney of the Center on Budget and Policy Priorities ran the numbers for my colleague E. J. Dionne, and he says the do-nothing plan would now lead to $7.1 trillion in deficit reduction — more than even the Fiscal Commission envisioned. Here’s how it breaks down:
— $3.3 trillion from letting temporary income and estate tax cuts enacted in 2001, 2003, 2009, and 2010 expire on schedule at the end of 2012 (presuming Congress also lets relief from the Alternative Minimum Tax expire, as noted below);
— $0.8 trillion from allowing other temporary tax cuts (the “extenders” that Congress has regularly extended on a “temporary” basis) expire on schedule;
— $0.3 trillion from letting cuts in Medicare physician reimbursements scheduled under current law (required under the Medicare Sustainable Growth Rate formula enacted in 1997, but which have been postponed since 2003) take effect;
— $0.7 trillion from letting the temporary increase in the exemption amount under the Alternative Minimum Tax expire, thereby returning the exemption to the level in effect in 2001;
— $1.2 trillion from letting the sequestration of spending required if the Joint Committee does not produce $1.2 trillion in deficit reduction take effect; and
— $0.9 trillion in lower interest payments on the debt as a result of the deficit reduction achieved from not extending these current policies.
Put another way, all we need to do to solve our deficit problem — or, more accurately, avoid creating one — is to enforce PAYGO rules in Congress.