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Deficits. What Deficits? Part I.

In a featured article in TaxAnalysts’ Tax Notes today, David Cay Johnston “argues that the fiscal cliff compromise (details from the Tax Foundation) will make it harder to solve the United States' long-term deficit and debt problems.” (HT Tax Prof Blog). Johnston covered tax policy for the New York Times and now teaches in Syracuse University’s law school.

Johnston first lists 10 things that were in the tax deal of the so-called ‘fiscal cliff” passed on New Year’s Day. For example, here are the first and the last of the 10 items:
  • “The Reaganite idea of broadening the tax base to allow lower rates is not just dead, but forgotten.”
  • “Despite all the rhetoric about balanced budgets and increasing federal debt, our elected leaders are unwilling to raise taxes more or cut the programs that actually add to the debt and weaken the economy.”

After that last point, Johnston adds:

“The scale of that last point is vividly illustrated in Congressional Budget Office projections in the accompanying chart. A quarter-century from now, all else being equal, the federal debt will be twice the amount of the economy's total annual output. Of course, as the CBO points out, all else will not be equal if the federal debt continues to grow at unsustainable levels.

“But do not expect any serious solutions, just bandages.”

For an idea of what the 112th Congress and the President gave us, take a look at the following graph that Johnston included in the article:

Finally, Johnston ends the article by reminding taxpayers:

"As the debate over spending cuts and the debt ceiling advances, keep in mind your tax burdens. And remember the scale of the numbers. Here is one comparison to keep in the forefront of your mind:

The Obama administration says that the fiscal cliff deal it made will mean $737 billion less in federal debt over the next 10 years. CBO data show that interest on the growing national debt will cost more than $770 billion just in the 10th year, assuming interest rates remain at current low levels."

Johnston's article is worth reading in its entirety. Especially if you watched the President's press conference this morning (White House Blog, includes 53-minute video; transcript from the White House Press Office; Associated Press report on the press conference; and, NBC News reporting of the press conference.)

We growled about the fiscal cliff deal previously with quotes by Kevin Williamson on January 5, 2013 and by Mark Steyn on January 6, 2013.

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