The real effect of fiscal cliff-jumping
Quality of Cliff Deal Easier to Gauge Than Quantity
By Ezra Klein - Dec 19, 2012 -- Bloomberg
Is the deficit reduction deal being negotiated by U.S. President Barack Obama and Speaker of the House John Boehner likely to be small-ball, medium-sized or a massive grand bargain that restructures the federal budget? Or is all the talk of deficit reduction misleading, camouflaging a deal that would actually increase deficits dramatically?
The answer is all of the above.
Measuring these deals is a frustrating exercise in a subspecialty of physics known as budget relativity. For example, viewed from one angle, the tentative Obama/Boehner deal is surely small-ball. It includes about $1 trillion in tax revenue and $1 trillion in spending cuts, for a total of about $2 trillion in deficit reduction over 10 years. That’s not nothing, but it’s on the small side of the various fiscal plans circulating Washington.
If you prefer a medium-size total, change your vantage point. Previous negotiations between Republicans and Democrats in 2011 led to the Budget Control Act, which will cut discretionary spending by about $1.5 trillion over the next decade. If you add that amount to the $2 trillion currently under discussion, you achieve a 10-year deficit-reduction package of $3.5 trillion. Now we’re getting somewhere.
(More here.)
By Ezra Klein - Dec 19, 2012 -- Bloomberg
Is the deficit reduction deal being negotiated by U.S. President Barack Obama and Speaker of the House John Boehner likely to be small-ball, medium-sized or a massive grand bargain that restructures the federal budget? Or is all the talk of deficit reduction misleading, camouflaging a deal that would actually increase deficits dramatically?
The answer is all of the above.
Measuring these deals is a frustrating exercise in a subspecialty of physics known as budget relativity. For example, viewed from one angle, the tentative Obama/Boehner deal is surely small-ball. It includes about $1 trillion in tax revenue and $1 trillion in spending cuts, for a total of about $2 trillion in deficit reduction over 10 years. That’s not nothing, but it’s on the small side of the various fiscal plans circulating Washington.
If you prefer a medium-size total, change your vantage point. Previous negotiations between Republicans and Democrats in 2011 led to the Budget Control Act, which will cut discretionary spending by about $1.5 trillion over the next decade. If you add that amount to the $2 trillion currently under discussion, you achieve a 10-year deficit-reduction package of $3.5 trillion. Now we’re getting somewhere.
(More here.)
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