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NEW YORK (CNNMoney)—Lawmakers risk derailing the economic recovery if they act too soon to slash spending or raise taxes substantially. But if they wait too long to tackle the country's burgeoning debt, they risk damaging the economy for decades.
That's a key message from the Congressional Budget Office, which released its long-term federal budget outlook on Wednesday....
...Congress' fiscal watchdog also echoed a message that Federal Reserve Chairman Ben Bernanke has been delivering for months: As tempting as it might be to take a hatchet to the budget ASAP, implementing those changes too quickly could end up worsening, rather than improving the fiscal outlook.
"Making such changes while economic activity and employment remain well below their potential levels would probably slow the economic recovery," according to the report.
Here's a good place to bring back the Center on Budget and Policy Priorities' chart and ask: Is it true for 2011 that the economy is at any greater risk for serious damage over the next decade by not "tackling" the debt? That's an assumption that has to be questioned by the real serious people, not the Very Serious People deficit-peacocking their way through this debate. David Dayen does a good job asserting just the opposite: Do nothing.
It’s the easiest to enact, it can’t be filibustered. In fact, you could get it done with just 41 votes in the Senate. It’s called “doing nothing.” I know, it’s not sexy and it doesn’t have a masthead that says “Moment of Truth” on it or anything. But it does preserve Medicare, preserve Medicaid, preserve Social Security, preserve food stamps, preserve the EPA, preserve food safety, preserve all federal regulatory agencies, and it puts the budget on a path to medium-term primary balance. What’s more, it doesn’t take effect until the end of next year, giving the economy time to recover and the ability to increase spending in the near-term to boost demand.
I know, it’s a horrible idea, the numbers just don’t work – except the CBO tells me that they do.
If Congress lets the Bush tax cuts expire or offsets their extension, implements the Affordable Care Act as scheduled and makes or offset the Medicare cuts prescribed by the 1997 Balanced Budget Act — which CBO calls the “extended baseline scenario” — the national debt will be totally manageable. If Congress passes laws extending the Bush tax cuts without offsetting the cost, repealing the Affordable Care Act and its cost controls and protecting doctors from Medicare cuts without making up the savings elsewhere — the “alternative fiscal scenario” — the national debt will be totally out of control.
That’s it. Larry Mishel put it to me this way a couple weeks ago: if we let all the Bush tax cuts expire and return to Clinton-era tax rates, we would not have any deficit problems in this decade.
It makes a lot more sense than austerity right now, which even the CBO and Ben Bernanke seem to think is a recipe for disaster.