There is no mystery, in Washington or anywhere else, about what actually needs to be done to bring government spending under control. One option is to do nothing. In its long-term budget outlook for 2012, the CBO presents a future it calls the “baseline scenario.” This is simply what would happen if Congress passes no new spending bills before January. The Bush tax cuts will expire. Automatic cuts to defense, Medicare, and discretionary spending will go into effect. To a pure deficit hawk, it looks pretty good. According to the CBO, it starts reducing debt as a percentage of GDP in 2016, and by 2022 it’s down to 61 percent (the same target the Ryan plan aims for). But there’s a reason the baseline scenario is often referred to as the “fiscal cliff”: It will limit growth in real GDP next year to half a percent.
This abrupt timeline will be destructive to the economy and terrible for jobs. Yet whether we make them soon or make them later, eventually cuts of this size will be necessary. This is fifth-grade math. No further study is needed. No panel of experts needs to be assembled. The baseline scenario, of course, won’t happen. Both parties are now negotiating under the shared assumption that neither can tolerate it. But as it in fact eliminates spending, it serves as a useful comparison. Any politician trying to sell a plan needs to prove that it’s better than doing nothing.
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