The Deficit Debate Is in the Twilight Zone

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In a deep background meeting with Tim Geithner and other members of the Treasury last week, one high ranking official told a group of reporters the White House was holding its breath to see how Congress would approach budget reform.

Today, Congress calls the administration's bluff with a public letter asking for "a strong signal of support" from the White House on deficit reduction. The letter was signed by 64 senators -- nearly enough to over-ride a presidential veto if their names appeared on a bill. So, a super-majority of senators have come together to ask the White House to help a super-majority of senators come together. Confused? You should be.

The White House is waiting for Congress to do something, which is waiting for the White House to do something ... and the fact remains that doing nothing might actually accomplish more than either side doing anything. If Congress writes no legislation (or letters, for that matter) in the next two years, the tax cuts passed in December 2010 will expire and automatically reduce our projected debt by at least $3 trillion over the next decade.*

Ezra Klein describes the folly with pitch-perfect bemusement:

For 64 senators to instead write letters about how someone else should be making affirmative noises about deficit reduction, well, read closely, that's a signal of a very different kind. The reality is that the White House can't write the bill on Congress's behalf. It can't pass the bill through Congress. And it can't kill the bill Congress passes if the bill has a veto-proof majority.

The upshot is that all actors are waiting for somebody else to do their job while they all float trial balloons about "starting a conversation" on deficit reduction. Only in Washington does asking to "start a conversation" mean, I would prefer that somebody else talk about this.

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* To be sure, this "doing nothing" plan is very expensive for the typical American family, because it means the full and immediate expiration of the December 2010 tax cut deal, which extended the Bush tax cuts, added a payroll tax holiday, and preserved some stimulus tax relief. Allowing the whole caboodle to expire by "doing nothing" would amount to a 4% hit -- or a $2,000 pay cut -- to the typical earner in 2012. To put that in perspective, that's arguable a worse hit to earners than the deficit commission's controversial plan to reform Social Security benefits.




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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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