Deficits

Tax Cuts

Posted on Thursday, January 27, 2011


Here's the question: Do tax cuts cause deficits? If not, then there's no reason to worry about the Congressional Budget Office's revised estimate that the deficit will reach $1.5 trillion this year, not $1 trillion, as they'd predicted in 2010. The bulk of the difference, as you can see in this table, is due to the tax deal, which shaved expected revenue by about $400 billion.
Republicans, however, are caught between a rock and a hard place: They don't like deficits, but they do like tax cuts. So they've emerged with a fairly creative answer: A balanced budget amendment that caps spending at 20 percent of GDP and requires a two-thirds vote for tax increases. It's hard to imagine looking at this revised CBO estimate -- or the last decade of fiscal policymaking more generally -- and concluding that one of our major problems is that it's been too easy to raise taxes. Quite the opposite, actually. But if the 21 Senate Republican behind this proposal have their way, the Congress will adopt the two-thirds budgeting rules that have worked so well in, yes, California. Now, don't get me wrong: I'm a native Golden Stater, and I love -- and miss -- the sun and the people and the tacos. But I don't miss the dysfunctional, supermajoritarian budget process, which has sent the state to the edge of total bankruptcy, and I don't know that Washington would be wise to adopt it. Can't we just steal the warm weather, instead? Ezra klein wonkbook wash Post


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