CBO reports on options to address the fiscal cliff that looms on January 1, 2013 as numerous tax rates are set to increase. Not too cool, not too hot, just riiiiiiiiight is an elusive standard to address the number one policy priority of 2012 (not harm the economy, move toward a credible long range plan to stabilize the deficit/debt). Many have said do nothing and the deficit problem is fixed, but that ignores the timing of the fix and how it will impact the economy.
So, what we need is a reasoned deal that does not harm the economic recovery, but that takes credible steps to raise taxes over time, and reduce spending as compared to default levels over the next several decades (particularly health care costs). From the prologue of my book:
As we head into the 2012 election, the task remains the same: we need to undertake policies to improve our economy in the short run, while seeking a long-run plan to move slowly toward a balanced budget in the future. To achieve the latter will require some profound reform of our health care system and an increase in the proportion of the economy collected in taxes. There are other issues to be gotten straight, but without addressing those two realities (taxes are too low given any plausible level of federal spending and projected health care costs too high absent reform) we will never again have anything near a balanced budget.
We will get to it next week….