Ezra Klein even makes a good point today by stating that even if a massive deficit reducing budget was passed tomorrow, actually implementing it would depend on congresses years down the road. And that's a shaky proposition at best.
One good thing from Obama's proposal is the idea of letting the Bush tax cuts expire for those making $250,000 and above (Remember, they would still get the cut on all income up to that amount. They would only see the increase on all income over that amount). I'll remain skeptical that Obama would actually go through with that. And of course as Ezra points out, it will depend on congress.
But the idea of letting those tax cuts expire leads me to this column by Annie Lowrey in which she says that instead of congress and Obama freaking out about the deficit they should just do nothing.
One might think that we need all of these big plans, these grand bargains, because of the enormity of the fiscal challenge the country faces. The United States is swimming in a sea of red ink, with trillion-dollar annual deficits and an unfathomably gigantic cumulative debt.
But the truth is we don't need any of these plans. Every one of them is entirely unnecessary for balancing the budget and eventually reducing the debt. They may even be counterproductive. Thus, Slate proposes the Do-Nothing Plan for Deficit Reduction, a meek, cowardly effort to wrest the country back into the black. The overarching principle of the Do-Nothing Plan is this: Leave everything as is. Current law stands, and spending and revenue levels continue according to the Congressional Budget Office's baseline projections. Everyone walks away. Paul Ryan goes fishing. Sen. Harry Reid kicks back with a ginger ale. The rest of Congress gets back to bickering about mammograms. Miraculously, the budget just balances itself, in about a decade.
So how does doing nothing actually return the budget to health? The answer is that doing nothing allows all kinds of fiscal changes that politicians generally abhor to take effect automatically. First, doing nothing means the Bush tax cuts would expire, as scheduled, at the end of next year. That would cause a moderately progressive tax hike, and one that hits most families, including the middle class. The top marginal rate would rise from 35 percent to 39.6 percent, and some tax benefits for investment income would disappear. Additionally, a patch to keep the alternative minimum tax from hitting 20 million or so families would end. Second, the Patient Protection and Affordable Care Act, Obama's health care law, would proceed without getting repealed or defunded. The CBO believes that the plan would bend health care's cost curve downward, wrestling the rate of health care inflation back toward the general rate of inflation. Third, doing nothing would mean that Medicare starts paying doctors low, low rates. Congress would not pass anymore of the regular "doc fixes" that keep reimbursements high. Nothing else happens. Almost magically, everything evens out.
This is very unlikely to happen. But I think its important to think about as long as everyone in Washington is freaking out over deficits and proposing massive changes in policy without even really understanding or caring about what they are reacting to. When you hear politicians or pundits saying we have to address the deficit problem you can just tell them to go join Donald Trump's investigators on a vacation to Hawaii and the 'problem' will largely just take care of itself.