Annie Lowrey writes about the fact that if we stick to the current law baseline the budget deficit goes away. Nobody has to do anything. Congress merely needs to refuse to do the things that make up the “current policy” baseline where we do doc fixed and extend tax cuts and add AMT patches.
I think that this is an important point not because doing nothing is optimal policy, but because it highlights the worthlessness of long-term deficit reduction plans. If the goal is to produce a projection that says the budget will be balanced in the medium term, then we’ve already achieved that — the current law baseline projection says the budget will be balances. If the goal is to produce a deficit reduction plan that’s credible with the markets and allows us to maintain low interest rates and low inflation, then we’ve already achieved that — the status quo is low interest rates and low inflation. In other words, there’s nothing that changing current law could possibly accomplish.
That’s not to deny that we should worry about what the actual budget deficit is in 2014, 2016, 2026 and all the rest. But the deficit in future fiscal years will be determined by the actions of future members of congress. What makes deficits low is not “deficit reduction plans” but disposition of members of congress to refuse to vote for deficit-increasing legislation. Like Barack Obama said he wanted to sign a universal health insurance bill but only if it didn’t increase the deficit. At the same time, he’s happy to sign “doc fix” bills, tax cut extensions, etc. regardless of deficit impact. George W Bush, by contrast, was happy to sign all kinds of bills (tax cuts, K-12 education spending hikes, Medicare expansions, more generous Pell Grants) irrespective of their impact on the deficit. If more members of congress shifted from a Bush-like view to an Obama-like view, deficits would go down. And if more members shifted from an Obama-like view to a Lowrey-like view, deficits would go down. But either way, what it takes is members who won’t vote to increase the deficit rather than members talking about deficit reduction plan.