(illustration by Oliver Munday for Time)
On his CNN blog (as well as in his Time column), Fareed Zakaria contemplates whether the U.S. could become the next Greece in terms of the bleakness of our fiscal outlook. He concludes “no,” because among other things:
The most important difference between Greece and America is this: America has many paths to solve its deficit problem. Were it to implement the Simpson-Bowles Deficit Reduction Plan, for example, it would instantly give America among the strongest public finances of any rich country.
Would Congress simply allow the Bush tax cuts to expire - returning rates to where they were under Bill Clinton’s presidency when America created almost 25 million jobs - that one action would provide the federal government with $3.9 trillion in revenues over the next decade and basically solve the deficit problem. We would still face the long-term problem of entitlements, especially health care costs, like every other rich country, but the short and medium-term crisis would be over.
And Fareed, we wouldn’t even have to let the Bush(/Obama) tax cuts expire. We could, for example, preserve the current rate structure of the Bush(/Obama) tax cuts, and pay for it by broadening the tax base. Then we would still be sticking to current-law revenue levels–i.e., levels adequate to achieve economically-sustainable deficits for the short-to-medium term (as you point out)–without having to stick to (mediocre) current tax policy as specifically written in current law. (I suggested this approach recently, here.) Then we’d have the perfect blend of the two approaches you praise here: (i) the recommendations of Bowles-Simpson (or “Simpson-Bowles”) in terms of base-broadening, tax-expenditure-reducing tax reform, and (ii) the revenue levels consistent with letting the Bush tax cuts just (finally) expire.
So on the 4th of July, let’s count our fiscal blessings. At least we have options far beyond those of Greece. And pretty good policy options at that.