Saturday, March 20, 2010

The Future...and Beyond!

Matt Yglesias has a very good post up about deficit politics:
[I]f the 111th Congress is going to care at all about long-term fiscal problems, that caring will necessarily take the form of promises about the future course of policy that will be subject to repeal by future congresses
His emphasis, and of course he's entirely correct.  In fact, his title is the relatively mild "All Deficit Reduction Plans Involve Promises About Future Action."  A more accurate title would be: "All Long-Term Deficit Reduction Plans Are Nothing More Than Promises About Future Action."  There is nothing, really nothing, that current Congresses can do to force future deficit reduction.  And since everyone agrees that the deficit problem is projected future deficits, the real story is that all relevant deficit reduction plans are nothing more than promises that can be revoked.

What really matters are the incentives the current Congress leaves for future Congresses.  And there, I'd say Obama and the Democrats have done a reasonable job -- given that they believe in universal health care.  Yes, the excise tax may never be implemented...but if it started tomorrow, that wouldn't keep a future Congress from canceling it, and as Yglesias points out, it's far more likely that savings will occur and revenues will be raised if they are current law that has to be changed than if they are popular ideas not yet enacted into law.  Of course, the biggest piece of this is that Democrats have, as they did in the 1990s, acted as if long-term deficits are such a bad thing that they are willing to suffer a short-term political price to tackle them. 

What do I think will happen?  If Democrats continue to hold majorities, then odds are that they will continue to support the benefits from the new policy and continue to support funding for those benefits.  If Republicans hold majorities, and act like they have recently, they'll slash taxes and refuse to pay the price for cutting popular programs, and we'll have very large deficits.  Of course, it's also possible that the next set of Republicans who are in the majority will be deficit cutters, but I wouldn't hold my breath on that one.

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