Tuesday, May 17, 2011

All you really need to know about the deficit

Here are two charts prepared by the Center on Budget and Policy Priorities (CBPP).  They pretty much tell you all you need to know about the deficit and why the most effective way to stop its growth is to allow the Bush tax cuts to expire.  The Bush tax cuts represent SPENDING that primarily benefits the rich and does nothing to stimulate economic growth.  Additionally, Congress doesn’t have to do anything to implement this single most important deficit reduction tactic since the Bush tax cuts automatically expire at the end of next year. 

Examine these two charts.  The first shows the sources of the deficit.  Look at the big slab of Big Orange in the middle of the chart in 2019.  That’s the effect of the Bush Tax cuts.  Now imagine that Big Orange didn’t exist.  Result, much, much smaller deficit.

How much could we cut the growth in the deficit by allowing Big Orange to just go away.  That’s the subject of the second graph.  Here look at the big scary RED LINE everyone is talking about.  That’s the deficit as a percent of GDP if we continue current policies, including making the Bush tax cuts permanent as the Republicans would like to do.  Now compare SCARY RED LINE to SOFT AND SOOTHING BLUE LINE.

By NOT extending the Bush tax cuts—in other words, DOING NOTHING—we keep the deficit as a percent of GDP pretty much as it is today.  That’s not great.  It should be lower, closer to 60% than 70% would be great.  However, it is pretty good.  All we would need then to really bring the deficit down would be a sustained recovery with a nice uptick in revenues.  And, if we did a few other things like allowing Medicare to negotiate with drug companies, implementing a millionaire’s surtax,  placing a small surtax on capital gains, particularly the kind generated by day traders, and so on, we could bring the deficit way down or do away with it entirely.

So, write your Congressman and tell him to just DO NOTHING and let the Bush tax cuts expire as planned. 

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