December 16, 2012
It’s getting harder and harder to figure out what the Washington Post wants us to be worried about as the budget standoff approaches some sort of resolution. A front page Post article today warned readers that some tax increases and spending cuts are still likely to take effect on January 1, even if there is an agreement to extend the Bush tax cuts for the bottom 98 percent of households and to fix the alternative minimum tax and some other expiring provisions. The Post accurately points out that these residual tax increases and spending cuts will have the effect of slowing the economy.
However, the residual tax increases and spending cuts can also be called “deficit reduction” of the sort that the Post has been demanding to combat the deficits that have been causing it to hyperventilate for years. It was possible to point to many of the tax increases and spending cuts that were associated with the “cliff” as accidents that no one actually wanted to see go into effect, but the residual tax increases and spending cuts are likely to be there in large part by design.
While this will be bad news for an economy that desperately needs more stimulus (i.e. larger deficits), and also for the people directly affected, this is exactly the policy that the Post and other Washington establishment figures from both parties have been demanding. It would have been worth pointing out that the resulting hit to the economy is exactly what most advocates of deficit reduction presumably want if they understand the impact of the policies they advocate.
At one point this article tells readers:
“Hovering over these negotiations are reminders of the summer of 2011, when Obama and Boehner tried in vain to craft a “grand bargain” that would have saved $4 trillion in spending over the next decade and allowed an increase in the federal debt limit.”
This is not true. Obama and Boehner were never close to a deal that involved $4 trillion in spending cuts. They had set this $4 trillion figure as a target for deficit reduction, which would include spending cuts, tax increases and interest savings.
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