Time to be Sane Adults on Taxing and Spending

The Congressional Budget Office (CBO), a non-partisan organization that basically does audits and analyses for Congress, recently released a report that stated, in essence, that hard choices on taxing and spending need to be made sooner rather than later to prevent a contraction that could harm the very very very slowly rebounding economy. As reported by USA Today, at the end of this year the "Bush tax cuts" are set to expire after they were extended when the original sunset clause kicked in and $1.2 trillion in spending cuts, agreed to in last summer's debt ceiling negotiations, will be triggered. In our current economic climate, as seen in Europe, such austerity measures could have a significant impact on the country's precarious recovery. The CBO's prescription, which many economists (and this non-economist) agree with is:

Or, if policymakers wanted to minimize the short-run costs of narrowing the deficit very quickly while also minimizing the longer-run costs of allowing large deficits to persist, they could enact a combination of policies: changes in taxes and spending that would widen the deficit in 2013 relative to what would occur under current law but that would reduce deficits later in the decade relative to what would occur if current policies were extended for a prolonged period.

Hopefully our elected officials can act like adults long enough to make something happen for the good of the country. And, not to get too melodramatic, the world considering how interconnected the global economy now is. Let's just say, with this being an election year and all, I'm not exactly holding my breath.


Image: By Carolyn Kaster, AP by way of USA Today.