While the war over the debt ceiling rages on, there is one simple way Congress could act to sort out nearly 75% of the GOP’s desired budget cuts: end the Bush tax cuts.
Societe Generale’s Rudy Narvas writes that an end to the Bush tax cuts from 2001 and 2003 would bring Republicans close to achieving their savings goals.
From Rudy Narvas:
What we want to emphasise is that the extension of these tax cuts do have a cost, and in terms of the Republicans’ plan to balance the long-term budget, tax cuts would be the equivalent of 74% of the proposed spending cuts. Under this scenario, we are not sure how one could really balance the budget. The Democrats’ plan includes only extending tax cuts for those making $200k, but even then, that may not be viable in a long-term budget balancing act. In the end, taxes will have to go up for any plan to work as discretionary spending can only be cut so much and the government cannot take a knife to cut interest expense directly.
Tax increases are not on the table, according to Republican Speaker of the House Boehner, so it seems like it won’t even be a topic for discussion for this Congress.
Note the sizable portion of the debt made up by the 2001/2003 tax cuts and the impact of the operations in Iraq and Afghanistan. Narvas points out that 28% of the our debt explosion beyond CBO estimates is a result of weaker than expected government revenues.
[credit provider=”Societe Generale”]