The normally astute Martin Wolf failed to do his homework for a column yesterday in which he described the deficit reduction plan put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson as "the only politically realistic long-term fiscal solution."
Actually there is a much politically viable solution: do nothing. Yes, this will make the deficit hawks at the Washington Post and other such places yell and scream, but it is both politically viable and economically solid. Unlike Bowles-Simpson, the do-nothing plan would not further slow the economy. (Remember, Bowles-Simpson as originally designed would have begun deficit reduction on October 1, 2011.) The do-nothing plan is obviously politically viable since it is currently what we are doing, more or less. (We'll have to see how the end of 2012 issues get resolved.)
The economic reality is that we face no urgency to do anything on the deficit. We will undoubtedly need some additional revenues over the longer term, in addition to reversing the Bush tax cuts for the richest 2 percent, but it is possible that other better solutions will become politically viable, for example a Wall Street speculation tax that would hit big banks like the one where Mr. Bowles serves as a director. (It's funny how they never considered taxing Wall Street.)
It's also possible that we will fix the health care system so it doesn't take an absurdly large share of GDP. That would require that folks like the insurers, drug companies and doctors take a hit, but it is principle possible that we could see enough political pressure in the future that this tiny elite is forced to take the hit rather than tens of millions of seniors living on $20,000 a year.
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