Do you understand how he did it: So how about it? Do you understand how Obama did it?
In yesterday’s New York Times, we were told that he had “reduced the risk of a fiscal crisis” with this week’s budget proposal; he had prevented “an uncontrolled explosion of debt” (see THE DAILY HOWLER, 2/15/11). More specifically, Obama’s proposal was “enough to prevent an uncontrolled explosion of debt in the next decade.”
We were glad to hear that he’d done all this. But we were puzzled by how he had done it.
How the heck did Obama do it? According to the Times, his plan would only “reduce the total projected deficits over the next decade by $1.1 trillion, or about 10 percent.”
(That’s projected deficits—not projected spending.) We didn’t see how such a relatively minor amount of deficit reduction could prevent the “uncontrolled explosion of debt” about which the whole world has been screaming. Beyond that, we were surprised to see projected deficits dropping rather quickly, to just three percent of GDP—a level of deficit spending which is widely described as “sustainable.”
How the heck did Obama did it? Needless to say, the Times made no attempt to explain, and we still don’t know for certain. But we would assume it has something to do with the assumptions built into those budget projections. More specifically: Do those projections assume that we will return to the tax rates of the Clinton years? Unless we’re mistaken, that’s what will happen “under current law,” unless Obama and the Congress agree to extend the current lower rates. And budget projections are usually done in accord with current law.
Is that why those projected deficits drop so far, so fast? On Monday, Kevin Drum offered this post about Obama’s budget—a post in which he urged us to recall a little-discussed, basic fact:
DRUM (2/14/11): [I]f we simply let the Bush tax cuts expire in 2012—all of them—and went back to the Clinton tax rates of the 90s, our medium-term deficit problem would be reduced to 3 percent of GDP in a stroke. That's pretty manageable. And we could do it, too: it's not as if the 90s were a hellscape of jackbooted IRS thugs confiscating all your money and driving the economy into the ditch, after all.This is hardly new. But in the gong-show discussion our nation’s been having, very few people are ever told that a return to the Clinton tax rates would transform our budget outlook. This would involve raising taxes, you see. And by the rules of the current game, we’re supposed to talk about spending cuts—spending cuts, nothing else.
Liberals encourage this gong-show, of course, obsessing on rates “for the top two percent” and pretending that’s the whole ball game. In that passage, Kevin talks about letting all the Bush tax rates expire.
Did those projections in the New York Times assume a return to the Clinton tax rates? We don’t know, but we do know this; in the small print of one Times graph, you can see that those budget projections only assume an AMT fix in the next three years.
(Alternate Minimum Tax.) The AMT gets fixed every year, of course, by full bipartisan agreement; in recent years, this has subtracted roughly $70 billion from projected revenue in any given year. But the projections which appeared in the Times assume that the annual AMT fix won’t occur in the last seven years of the decade. This is part of the reason why those deficit projections start to look so good.
You’d think the Times would explain such things, but that would be against all the rules. By the way—here’s a letter in which a worried high school student shows that she has ingested an ongoing novel:
LETTER TO THE NEW YORK TIMES (2/16/11): The mere mention of the deficit gives me a headache. As a 17-year-old, I have no control over how politicians spend my money (that is, the money I have yet to earn) since I cannot yet vote.All I can do is sit and watch as politicians “eat the future,” because they are afraid to make the tough political decision to actually cut spending, since it could jeopardize their chances for re-election.
Stop borrowing from the future. We might not be able to stop you now, but we do turn 18 eventually.That girl has every right to worry—but she has ingested a norm of her culture. She only thinks about spending cuts. Quite likely, no one has told her what would occur if we returned to the Clinton tax rates—if we raised everybody’s taxes. The chances are good that she has never so much as considered this possibility—that she’s never seen it discussed.
One last note on the way the Times works:
Read this news report, in this morning’s paper. From its headline on down, the report asserts that Chicago is now “less black,” according to new census figures. Incredibly, the report never says how much “less black” the city is.
They don’t need no stinking numbers at the glorious Times!
