Don’t Just Do Something, Stand There

This is the underlying message from Bruce Bartlett (FT). Basic argument: unlike Europe, the US already has the policies in place to stabilize the debt-to-GDP ratio.  On the revenue side, the Bush/Obama tax cuts are scheduled to expire and the alternative minimum tax continues to affect more taxpayers. Absent an extension of cuts and annual fixes to the AMT, revenues would rise significantly.

On the spending side, consider Medicare. The sustainable growth rate formula was enacted in 1997 by Congress to constrain the growth of Medicare via controls on payments to doctors. Since 2003, “doc fix” legislation has been used to avoid imposing the cuts. This, combined with the forced $1.2 billion sequestration (thank you super committee) could help restrain budgetary growth.

When combined, Bartlett concludes that the 10 year impact would be to reduce the deficits by $5.5 trillion and save an additional $1 trillion in debt service, thereby stabilizing the debt-to-GDP ratio at 60 percent.  Obviously, there are better ways to stabilize the debt-to-GDP ratio, but they may be far more difficult politically than to simply stand back and allow existing laws to play out.

The “do nothing” Congress has become a talking point in recent weeks. What are the odds that Congress will “do nothing” if the end result is to bring us closer to fiscal stability?

One thought on “Don’t Just Do Something, Stand There

  1. This is one of the reasons why the whole deficit fight this year has been so annoying to me. The best deficit reduction plan (i.e. cuts it the most) on the table the whole time has been to simply do nothing and let current law stand.

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