You Want Fiscal Responsibility? Let The Bush Tax Cuts Expire

As Zero Hedge regular madhedgefundtrader points out, all Obama has to do to fix the deficit is...nothing.

Out of a current projected budget deficit of $1.3 trillion, $700 billion, or 54% comes from the Bush era tax cuts, $320 billion (25%) from a tax revenue fall off caused by the Great Recession, $200 billion from the wars in Iran and Iraq (15%),  and $50 billion (4%) is generated by Obama’s recovery measures. The TARP and the bailout of Fannie Mae and Freddie Mac are so small, they don’t even register on the chart. All of the angst, complaining, moaning, blustering, and carping is about the 4%.

You often see this in politics, where the debate gets focused on where the problem isn’t, not where it is, and is a big reason why I’m not in that business. Markets have a fascinating way of seeing straight though this impenetrable fog. So while the noise out of Washington is trying to convince us that these deficits are ruinous, the ten year Treasury bond yields we saw yesterday at a stunning 2.97% are telling us that, in fact, they are no problem at all, and that the government can now borrow nearly infinite amounts of money at the lowest interest rates in history.

There are some other really interesting things that this chart and the bond market are telling us. The Bush tax cuts expire next year, and a recovering economy will bring a return of tax revenues, eliminating 79% of the deficit. The scheduled withdrawal from Iraq next year will cut another 7%. This assumes that Obama is unable to get a single additional piece of legislation through the congress, a distinct possibility if he loses control of congress in November.

This is the writing on the wall the bond market is attempting to focus our blinkered eyes on. If anyone else has another set of believable numbers that reaches a different conclusion, I am all ears. 

So sure, if Republicans are serious that we have to get rid of deficits, they they will let the Bush tax cuts expire.  And if Obama is serious about it, he won't lift his pen to sign any sort of extension on them.  Bam, we lose a huge chunk of deficit and get back on track.

What's that you say?  There's no way on God's green Earth that Obama will let this happen?  Why not?  According to Republicans, Obama's already doomed as a one term President anyway, and the Republicans will control Congress until the End of Time Itself.

What does he have to lose by letting Bush's tax cuts, the single largest contributor to our deficit, expire?