Budget

Fiscal cliff aversion -- cost or savings?

Jeffrey Zients

Jeffrey Zients at OMB disputes the analyses that say averting the fiscal cliff will cost trillions of dollars.

Congress managed to avoid the fiscal cliff, but there is some debate over whether the deal helps or hurts the bigger budget picture.

The Congressional Budget Office scored the legislation as costing $3.6 trillion compared to "current law" -- which mandated the sequestration and tax hikes that legislators and the Obama administration were scrambling to avoid.

The Office of Management and Budget, however, sees nearly three-quarters of a trillion in savings. Jeff Zients, the Deputy Director for Management for OMB, wrote a blog entry on New Year’s Day to say that the CBO’s score “does not provide a realistic perspective on the impact of H.R. 8,” and argued that "current policy," not current law, is the proper point of comparison. This current policy assumes that “the Bush tax cuts, the AMT patch, and expiring business tax provisions will be extended; that the Sustainable Growth Rate (SGR) cuts in payments to Medicare physicians will not take effect, and that the sequestration will be turned off,” Zients wrote.

Based on this current policy, Zients pointed out that H.R. 8 would reduce the deficit by $737 billion, and would reduce spending by $107 billion. “So H.R. 8 not only keeps taxes low for the middle class, asks the wealthiest to pay for their fair share, and helps the economy continue to grow, it also reduces the deficit by $737 billion under this more realistic scenario,” Zients said.

House Oversight and Government Reform Chairman Darrell Issa (R-Calif.), meanwhile, put the price tag even higher than the CBO estimate. Speaking on the House floor on Jan. 1 before the final vote on H.R. 8, Issa said he could not support the deal because it would put $4 trillion in additional federal debt "on the backs of future generations."

About the Author

Emily Cole is an editorial intern for FCW.

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Reader comments

Thu, Jan 3, 2013 Realistic

Zients is obviously a political dog and his praise for the deal has to be dishonest. Whenever you have some one claiming that this new tax change will have "the wealthiest to pay for their fair share" then you know it is all political BS. Sure, the economy is growing, but extremely slowly relative to the past several decades. Also, there is nothing in this deal to support any real deficit reduction as it is obvious that the deficit spending will continue to be higher than any time before 2008. So anything else that Zients says about this deal has to be suspect at best or pure BS at worse case.

Thu, Jan 3, 2013 OccupyIT

And under the third shell is...... nothing. No action, no plan. Just a happy dance while smart people act like idiots discussing how 'much' of a sucking sound is under their shell. Don't you wish they would actually solve problems like we hired them to do instead of comparing the size of their vacuums?

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