For Deficit Panel, Failure Cuts Two Ways
By BINYAMIN APPELBAUM and ANNIE LOWREY
NYT
WASHINGTON — The latest Congressional failure to agree on a plan for balancing the government’s books could yield a surprising result: a sharp reduction in annual federal deficits, larger than anything contemplated by the special panel that reached its fruitless finale on Monday.
But the absence of an agreement also threatens to significantly slow growth in an already ailing economy by raising taxes on almost everyone while reducing government spending on almost everything.
Tax cuts passed in the Bush administration will expire at the end of 2012. By law, the panel’s failure triggers new caps on spending, cutting $1.2 trillion from the military, education, health care and other priorities over 10 years beginning next fall. The combined impact of higher tax rates and less spending would reverse the growth of annual deficits beginning in 2013, reducing by more than half the current $1.3 trillion gap between annual revenue and spending.
That has inverted the normal reality, in which spending rises inexorably unless Congress musters the political will to impose cuts. Now, although both parties say they are committed to more gradual approaches, an agreement is required to avoid the fiscal equivalent of shock therapy.
(More here.)
NYT
WASHINGTON — The latest Congressional failure to agree on a plan for balancing the government’s books could yield a surprising result: a sharp reduction in annual federal deficits, larger than anything contemplated by the special panel that reached its fruitless finale on Monday.
But the absence of an agreement also threatens to significantly slow growth in an already ailing economy by raising taxes on almost everyone while reducing government spending on almost everything.
Tax cuts passed in the Bush administration will expire at the end of 2012. By law, the panel’s failure triggers new caps on spending, cutting $1.2 trillion from the military, education, health care and other priorities over 10 years beginning next fall. The combined impact of higher tax rates and less spending would reverse the growth of annual deficits beginning in 2013, reducing by more than half the current $1.3 trillion gap between annual revenue and spending.
That has inverted the normal reality, in which spending rises inexorably unless Congress musters the political will to impose cuts. Now, although both parties say they are committed to more gradual approaches, an agreement is required to avoid the fiscal equivalent of shock therapy.
(More here.)
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