Tuesday, August 2, 2011

Defending the Deficit

With the done deal on the federal deficit, regardless of whether one thinks enough was done or not, the question is who the losers are?

The very conservative right and the very progressive left both are expressing their beliefs that they lost big. Since there are no new taxes, it’s hard to credit the contention the very conservative right lost, even though a balanced budget constitutional amendment is not part of the accepted deal.

The very progressive left is upset that there are neither new taxes on the rich nor closing on tax benefits to oil companies. However, the Bush-era tax cuts are due to expire beginning in 2013 anyway.

So, what’s done? First, nothing is cut until 2012. Then, mainly the deal cuts come from half defense/secuity and half from discretionary spending (not Medicare, Medicaid or Social Security), and sets a process for automatic cuts if directed cuts aren’t made.

On the automatic cuts, all depends on whether Congress accepts recommendations by a panel of peers. If not, half the cuts affect defense and security (Defense, State, VA and Homeland Security), the other half in discretionary spending. That’s $648 for each half. But, the final eight years of the deal don’t mandate cuts to “security” accounts.

In the middle term, could liberals (tending to oppose to defense spending) hope to do better than cut defense by $684 billion in fiscal 2012 and $686 billion in fiscal 2013? And, after 10 years, the federal deficit will be much larger then than now.

But, of course, it is notoriously difficult for a present Congress to limit the actions of a future Congress.

No comments: