On the scale of the federal budget, $18 billion is a rounding error. Literally. It's about one-half of one percent of the budget, which rounds down to zero. But a small group of moderate Republicans are threatening to vote no on financial reform because an $18 billion fee is included in the final bill.1 It's not there to punish banks or to create a slush fund for new spending. It's there solely to make the bill deficit neutral. Ryan Avent:
And yet the most moderate Republicans in the Senate are balking at the charge. Not because they disagree in any real sense with the economics of the fee. They simply won't vote for anything that looks like a tax.
This is why it's so difficult to imagine a solution to America's long-run budget crisis. It's a political impossibility to move to primary surplus on the back of spending cuts alone. Democrats are highly unlikely to win a Senate majority comfortably over 60 seats any time in the near future. And the most moderate Republicans won't vote for tax increases, even when the increase in question is a relatively small, one-off charge on big banks.
There's no room for compromise on the deficit there. Zero. The Journal story is trouble for the fate of the financial reform bill, but it should worry deficit hawks even more.
And I suppose it would worry them if there were any actual deficit hawks in the Republican Party. But there aren't, are there? There are plenty of tax-on-rich-people-and-corporations hawks, but no deficit hawks. Let's stop pretending otherwise, OK?
1Actually, I got this wrong: it's $18 billion over ten years, which works out to about .05% of the federal budget. In other words, it's really a rounding error.