Krugman has a great piece today that reminds of just where this $1 trillion dollar deficit comes from in the first place. What he shows is that the deficit is chiefly made up of 5 things: the Bush tax cuts, the Bush wars, the economic downturn, the recovery measures to deal with the downturn, and the TARP and Fannie and Freddie.
So the "structural deficit" is driven by two things more than anything else: the Bush wars and the Bush tax cuts. So if cutting the deficit is what matters why wouldn't you begin with the tax cuts? And yet the GOP wants to do it by going after Medicare and Social Security.
The Bush tax cuts have always been a pet peeve of mine. I can't think of a worse fiscal policy in my life time. Yes, there were some tax cuts for the middle class and poor-and Obama and the Dems support keeping them. Still those were basically just sweeteners. When you factor in just how regressive those tax cuts were, it's clear that if we have any hope of repairing the American Dream, we must end the tax cuts for the rich at least.
Mind you, though I don't want to end the cuts for the middle class and the poor, it's hard to deny that the middle class and the poor were better off before those cuts. Yes, the poor were better off net when their rate was 15%. Again, I don't want to raise it-I'm in that bracket right now myself. However, if we go over the cliff it really wouldn't be the worst thing in the world:
"The Bush tax cuts were sharply regressive -- that is, people with high incomes benefited far
more as a percentage of their income. The expiration of the cuts would be
correspondingly progressive, with large increases in the tax burden on
high-income and wealthy families and individuals."
"If all the tax
cuts were allowed to expire, after-tax income of the lowest income quintile will fall 0.5
percent, and the middle-income quintile's income will decline 2 percent. For the
top-income quintile, however, after-tax income will fall by $7,119, or 4.1
percent. And the top 1 percent by income bears the brunt of the change, paying
an extra 6.4 percent of income, or $70,746."
So a drop of 0.5 percent would not be decimating and it would give us more revenue for more social spending to help that income group.