JONATHAN CHAIT FEBRUARY 9, 2011
Since today there's another entry in what I expect will be a perpetual series of articles urging President Obama to make a bipartisan deal to cut the deficit, let me plug my (subscription only, so subscribe!) TRB column arguing that there's a better and easier way to handle the medium-term deficit:
The deficit is a huge dilemma that’s too big for one party to solve, say the pundits and various deficit scolds. (Alan Simpson and Erskine Bowles: “Neither party can fix this problem on its own, and both parties have a responsibility to do their part.) Nonsense, I say. There’s a really easy, and 100 percent partisan, answer: Just let all the Bush tax cuts expire. President Obama can accomplish this without negotiations, compromise of any sort, or even putting aside petty agendas for the national good. The solution is hiding in plain sight.
Can he really think that Chait is the first to come up with this? For a start, it's the letter of current policy. Here's a new idea: call me crazy, but let's do what we're already doing. Unfair, you might say: up to now, nobody has actually advocated leaving current law in place. Not so. The idea of reversing all the Bush tax cuts after a temporary extension has been in the air for ages.
Martin Feldstein suggested it in the Wall Street Journal last May: Extend the Bush Tax cuts--For Now. (I mentioned the article approvingly in a subsequent blog post and column.) Last September, in an NYT column that attracted a lot of attention, Peter Orszag made the same argument.
Absolutely correct. I did not invent this policy proposal. What I think I did come up with as an explanation as to why this plan is far easier, politically, than cutting a deal with Republicans. Unfortunately Crook seems not to have read that part of it. He writes:
Restoring the Clinton tax rates is certainly not the best way to close the deficit, even if you think raising revenue should be a big part of the solution (as I do). A base-broadening tax reform of the sort proposed by Bowles-Simpson would be much better from an economic point of view. It would also be easier from a political point of view, because simply letting all the Bush tax cuts expire would unambiguously break one of Obama's 2008 promises (whereas raising more revenue from a broader base would only kind of break it). It's ridiculous to think, as Chait and Dionne both seem to, that Obama will be able to campaign in 2012 without committing himself one way or the other on this. If a tax reform hasn't already been done by then, would he be willing to campaign on the pledge to let all the Bush tax cuts expire?
The beauty part, as I explain, is that Obama doesn't have to campaign in favor of raising taxes on the middle class. He can campaign on maintaining the Bush tax cuts on income below $250,000. All he has to do is refuse to sign an extension of the tax cuts for income over $250,000. If he does that, Republicans will block the whole thing, and we'll revert to Clinton-era rates. Obama can turn the GOP's fanatical attachment to tax cuts for the rich against them. He can be in favor of middle-class tax cuts, and he can let Republicans block those cuts for him.
Read my column for a more detailed explanation of how and why this can work.