A framework for compromise on deficit

For all the partisan squabbling about the U.S. deficit, the path forward is remarkably clear.

A survey of the economists who are members of the National Association for Business Economics found broad agreement on how Washington should deal with the issues of a sluggish economy and a high deficit.

The country needs more fiscal stimulus until 2014, at which time it should throttle back. This will help the economy recover from the recession, thus increasing anemic tax revenue and reducing recession-triggered welfare expenses.

Congress should then deal with the deficit by reducing expenditures and increasing tax revenue. A majority of the economists surveyed said taxes — including payroll taxes, top marginal income taxes and capital gains taxes — should not be increased until 2014. In other words, they felt it was counterproductive to increase revenue until the economy is in better shape.

Democrats won’t like the economists’ suggestions because of the call for leaving the Bush tax cuts in place for another year. Republicans won’t like the suggestions because they acknowledge a need, after 2013, for raising some taxes to reduce the deficit.

The survey, in short, provides a solid framework for a compromise that would shake the nation’s post-recession lethargy and begin the process of reducing the deficit.

Such a compromise would also address what the economists viewed as the economy’s most urgent problem, the lack of certainty resulting from Washington gridlock.


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Filed under stimulus, Tax reform

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