Subject: Ezra Klein
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "David Schwerin" <[email-masked]>
Date: Thu, 23 Jun 2011 08:12:15 -0400

The deficit deal is getting more complicated. Sen. Kent Conrad says $2 trillion in deficit reduction isn't enough. Sen. Harry Reid wants it to include stimulus. Conservative groups are trying to extract a pledge from Republicans that they won't vote for a deal that doesn't include a cap on spending and a constitutional amendment mandating balanced budgets. But perhaps this would all be easier if Congress admitted what it really was: a deal to reduce the deficit that replaces another deal to reduce the deficit.
On Wednesday, the Congressional Budget Office released its latest long-term budget outlook. As always, the scorekeepers offered up two scenarios: In the first, Congress does nothing, follows the laws currently on the books -- which means the tax cuts expire, the Medicare cuts from the 1997 Balanced Budget Act go into effect, and the Affordable Care Act is fully implemented -- and the debt stabilizes. In the second, Congress extends most of the tax cuts, ignores the Medicare cuts and repeals various cost controls in the Affordable Care Act. Debt, of course, explodes.

We have a congress problem, not a deficit problem. The deficit only explodes if the next few congresses vote to detonate it. Congress doesn't have to extend the Bush tax cuts without offering offsets, or put off the Medicare cuts without paying for them in other ways, or do the easy parts of the health-care law without doing the hard parts. The answer to this, however, is not a high-stakes negotiation over the debt ceiling, where one false move could bring down the American economy, but a much-strengthened version of PayGo, where deficit-increasing deviations from current policy need to be offset with spending cuts or tax increases elsewhere.

Politicians are constantly talking about the need to signal seriousness to the markets, but what could be more serious than saying that they will work from the baseline in which America's deficits are much more under control, and though they intend to change those policies, they do not intend to deviate from the manageable deficit path they've already agreed to? That must be preferable to saying that Congress chooses to believe it will vote to increase the deficit by trillions over the next 10 years, but that the market shouldn't worry as the two parties plan to stop the government from paying its bills and throw the financial system into chaos if the other party doesn't agree to the deficit-reduction strategies they prefer.

Eric D. Schwerin
[email-masked]

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