Let’s start with the Obama tax bill enacted yesterday. This was the tax increase on the rich that the Democrats have yearned and clambered for and which has been almost the entirety of the president’s fiscal agenda for four years. What effect will it have on the deficit? Here’s a quick chart made from CBO’s score of the bill compared to their last current-policy baseline:
That should do it, right? And these projections are based on a pretty rosy set of economic assumptions. If growth is slower than CBO projects (which it has been in recent years), then revenue will be lower and spending will be higher. So after all that sound and fury, all the effort and the drama, the great Democratic achievement of the fiscal cliff showdown amounts to essentially nothing in terms of even the near-term fiscal problem.
As this makes clear, the idea that you can leave today’s spending trajectory in place and pay for it with rising taxes is just a fantasy. Revenue is now a bit below its postwar average, but a return to that level (which CBO projects, again based on potentially dubious expectations of robust growth) would do precious little to address our coming fiscal calamity. What you see here is a spending problem, and it requires a spending solution. That’s not a matter of ideological preference but of the actual nature of our budget trends.