Part 1: On Election Mythology
Part 2: On Trajectories and Private Sector Jobs
We've looked at some myths about Obama's first term, as well as some of the more important trends in the labor market. Today, we're going to (try to) tackle the issues of deficits, debt reduction as a campaign tool, and taxes--more specifically, tax cuts--as they relate to the current deficit situation.
(As a note, there are two words used a bunch below, but they are not used interchangeably. For reference, when I use the word "deficit" I'm talking about the yearly fiscal budget deficit. When I use the word "debt" I'm talking about the national debt. Big difference, and important in many of these contexts.)
One of the big campaign points of the Romney campaign is the issue of the national debt, and tangentially the federal budget deficit. I looked at the deficit in very small part on Monday as one of the four myths. Today, we're going to look at Romney and his political party, since they of late have been driving this "deficit and debt" bus.
I take serious issue with the notion that Romney will be better on the deficit. As high as the deficit is, it hasn’t grown under Obama (yes, the national debt as a whole has, but it has been growing steadily since 1957 and yet here we all still are...). I take issue with this notion that Republican politicians are somehow misers when it comes to deficit spending; it’s just not true, even though in 2010 they started trying to sell the idea that it is.
For 20 years, under Reagan and the Bushes, the national debt increased compared to GDP every single year. Dick Cheney himself said: "Reagan proved deficits don't matter." When Reagan’s first fiscal year started, the debt was $998 billion. He increased it by over 186% in eight years, or 23.3% for each year. George W. Bush increased his national debt by 89% in eight years, or 11.1% for each year. George H.W. Bush and Clinton grew it by 54% and 32% respectively. So, yeah, the national debt has grown under Obama by 36%, only slightly higher in relation to his predecessor, and ahead of two other Republican presidents over the past 30 years.
Most damning in terms of evidence of where we are right now comes from the CBO, which releases a 10-year forecast every year. Then, each year, they take a look at the past 10 years as compared to their forecast from 10 years ago. If we're seriously going to look at deficits and national debt, this is a damn good place to start. From the CBO, revised in June of 2012:
In January 2001, CBO's baseline projections showed a cumulative [budget] surplus of $5.6 trillion for the 2002–2011 period. The actual results have differed from those projections because of subsequent policy changes, economic developments that differed from CBO's forecast, and other factors. As a result, the federal government ran deficits from 2002 through 2011. The cumulative deficit over the 10-year period amounted to $6.1 trillion—a swing of $11.7 trillion from the January 2001 projections.
Funny, we're $16 trillion in debt. CBO says we could have only been $4.3 trillion in debt. And, though the Republicans are so quick to blame Obama for this, remember this: George W. Bush inherited a budget SURPLUS of roughly $127.3 billion in 2001, which followed three other surpluses under Clinton: $69.2 billion in 1998, $125.6 billion in 1999, and $236.4 billion in 2000.
This was not that long ago. That national debt was still substantial when Bush was sworn in: around $5.7 trillion, and that coming even after four straight years of a budget surplus. However, Bush IMMEDIATELY said that the budget surplus meant we were all paying too much tax! Tax cuts for everyone! And so, it is with great non-objectivity that I state that anyone that voted for Bush even once has no right to complain about the national debt under Obama. Why not, you ask?
The 2002 budget deficit, which was Bush's first budget? $157.8 billion deficit. Total budget deficits under George W. Bush, from 2002-2009: $3.5474 TRILLION.
So, when Republicans--especially ones serving in government currently--claim to be the party of fiscal responsibility, the numbers don’t lie: we know better. The truth is that EVERYBODY in government since Bill Clinton and the teeth-gritting bipartisan work of the late 90's--when they weren't trying to impeach him for getting a hummer--are the last people that can lay any claim to any kind of fiscal responsibility.
Check VP candidate Paul Ryan’s voting record when it comes to deficit spending. And he's supposed to be the "budget hawk"!! Check Ryan's budget proposals, which Romney has said he would sign into law were they to land on his desk as president. Per FactCheck.org back in 2011:
Ryan says his plan would not increase the debt. In fact, under his plan the public debt would increase from $10 trillion in 2011 to $16 trillion in 2021, by his own figures. That’s a slower increase than under President Barack Obama’s budget, but the debt would still rise substantially.
I think almost everyone can agree that deficit spending needs to be curbed. However, the notion that it’s ALL on Obama right now just isn’t accurate. And, there’s no data that Romney would somehow slow deficit spending. In fact, it seems like he’ll increase it. THIS is the figment of our collective imagination: that we can just keep on cutting and cutting taxes, and still somehow balance our budget. The only president to balance a budget since Richard Nixon was Bill Clinton, and he did it by raising some taxes. Republicans have all signed a pledge to Grover Norquist--a non-elected official, mind you--that they won't even CONSIDER any tax increases. So, if it is your policy belief that taxes need to be cut to stimulate the economy, then you have to take the issue of debt and deficits off the table. Those two ideas cancel each other out.
Romney STILL hasn’t told us how his tax cuts--which, as we discussed previously, will create jobs at a slower rate than our current job gains--will even be revenue-neutral and won't heavily favor the rich. The Tax Policy Center has said it’s mathematically not possible (source), and the big reason why is that his tax cuts do away with the Alternative Minimum Tax, which is put in place to keep the super-rich from taking enough deductions to reduce their amount paid below a certain threshold. He's also cutting the capital gains rate and the estate tax, both of which heavily favor the very wealthy.
And, despite the claims that the cuts will somehow broaden the base enough to create enough revenue to balance everything out, Romney’s claim is just 7 million jobs over 10 years. 700,000 additional tax payers per year isn’t enough to offset the $500 billion-per-year deficit the tax cuts would create, unless each of those new taxpayers forks over $714,285.71 a year.
I know, I know, it's not really that simple. More taxpayers would imply lower unemployment, which in turn means fewer monies paid out by government support agencies. But, look at that number. And, consider that, here in Ohio, if you made ZERO income in wages for a calendar year from June 2011-June 2012, your MAX unemployment benefit is $2678.00. 700,000 people at that rate would only account for $1.875 billion in savings over a year. The tax cuts cost $500 billion over a year. It still doesn't add up, unless everyone starts paying a ton more sales tax and we jack up payroll taxes. But that won't happen, because the Republicans all signed a pledge for NO NEW TAXES!
The ironic thing is that, in a way, Romney is potentially proposing a Trojan Horse tax increase. The original notion was that removal of deductions would cover the revenue needed to pay for the tax cuts (which begs the question, aren't you just robbing Peter to pay Paul by paying a lower rate but still somehow owing the same amount of money?), though he won’t say specifically which deductions are on the table.
All I can say is: if the mortgage and charitable donations deductions go away, my tax obligation WILL GO UP even if my "rate" is lower; you'll have to take my word for it that I'm squarely in the middle class. It doesn't take a slide rule to figure this stuff out.
And this is Romney's sleight-of-hand. He can say that he's not raising taxes on anyone, because he's cutting the rate for everyone. However, we all lower our amount of money owed (hence, tax refunds) by deductions. And, it's just simple math: for people of very modest incomes, giving up deductions definitely has a very large impact in the percentage of money owed. So, Romney can "cut middle-class taxes" while still causing members of the middle class to either owe more money come tax time, or get smaller refunds. And that, by every definition, is not a "tax cut" for the middle class.
Conversely, by removing the AMT, cutting capital gains, and gutting the estate tax, there's no "floor" for the super wealthy anymore. How all of THAT doesn't add up to a huge drop in revenue--and therefore a huge increase in the federal budget deficit--is a feat of mathematical genius we've not seen on this planet before. Except that it isn't, because Romney STILL hasn't explained how it will work.The "broadening the base" argument doesn't add up, as we showed above. Romney's latest tack has been this notion of capping deductions, which I'm sure sounds like a great idea in theory. But, until we hear specific numbers (Romney just made one up on the spot in the town hall debate), there’s no way to know if it will work. But, I'm a subscriber to the principle that all things being equal, the simplest explanation tends to be the right one, combined with the notion of "following the money" when it comes to deciding what's true.
Romney took a deduction for his wife's dressage horse that was more than I've made in any one year of my now-14-year professional life. Am I to believe that Romney is now suddenly going to cap deductions in such a way that he’d forfeit enough of his to balance out this tax rate cut? Follow the money.
Further, if you believe him, Romney believes the government has little to no role in the lives of every-day people (unless you're gay or are putting something into/taking something out of your uterus). Why, then, would I believe that he’s suddenly going to change the deduction policy to give up MORE of his own money to an institution he doesn’t believe in? He didn’t become a gajillionare by giving away more of his money. The simplest explanations tend to be the correct ones. Follow the money.
But, to be fair, those last two paragraphs are pure editorializing on my part, mainly because Romney simply won't tell us how it's going to work. He skirts this notion of the math by saying that "the rich will still pay the same share of the taxes that they do now." Well, sure. But the devil's in the details: If the top 10% pay 70% of the taxes, then (as an example) they'd be paying $700 million of a $1 billion pie. Romney wants a 20% rate cut across the board, which would imply that the new pie would be $800 million. The top 10% can still pay 70% of that pie, but that slice drops from $700 million to $560 million. So, just in this tiny example, the top 10% have gotten out from under $140 million in taxes while "still paying the same share" of the taxes.
This is just math, people. Maybe this is why Obama is pushing so hard for more math teachers. Romney just wants us to trust him that it will work. Vote for me! We'll sort the whole thing out after the election! I, for one, don't trust him, and neither should the average middle class person. Romney can say he's concerned about the middle class all he wants, but there's no real evidence that his policies somehow don't favor his super-rich buddies.
On top of that, Romney wants to increase military spending. The $2 trillion number is a bit of a reach by Obama; what Romney has said is that it shouldn't drop below 4% of GDP. However, in a fact-check of the argument, Glenn Kessler had this to say:
To sum up, the $2 trillion figure is not adjusted for inflation, is based on predictions of the size of the economy 10 years from now and makes assumptions about Romney’s policy that his campaign says are not correct.
Still, Romney is proposing a significant boost in defense spending. By the campaign’s own account, the budget increase is as high as nearly $1.6 trillion over the president’s current path — or at a minimum almost $1 trillion more than Obama’s budget two years ago.
So, regardless of what figure you use, Romney is essentially proposing at least $160 billion a year in additional military spending. And, regardless of whether or not you think that spending is necessary, it's STILL SPENDING that is not accounted for by increased revenues.
What I’m trying to argue today is that, if we truly want to cut the deficit and national debt--for which both parties bear plenty of responsibility--who’s being more realistic in 2012? Obama, who is willing to admit that we’ll have to raise revenues while also cutting spending, and has proposed raising taxes on wealthy people to help do it? Or Romney and Ryan, who are proposing a spending package so massive that it ALONE will cover almost HALF of our current budget deficit EVERY YEAR FOR TEN YEARS? Without any provable means of offsetting that increase? And no discernable boost in job growth according to their own numbers?
It just doesn't add up. And, NO ONE on the Republican side should talk about the debt and deficit reduction as a reason to sack Obama, because math is not on their side.
Romney claims the president's proposals will raise taxes on the middle class. Factcheck.org says that's not true on its face, and is based on a partisan report that offers no definitive answer as to what will happen.
And, with Romney as a whole, the spending collateral damage of his tax policies elsewhere is, in my opinion, catastrophic. Is Romney’s tax cut proposal so good that we have to sacrifice Medicaid for it, for instance? That we need to make it legal again for insurance companies to deny coverage to people with pre-existing conditions (even though, as the CBO pointed out this summer, repealing "Obamacare" would actually RAISE the budget deficit by almost $2 billion per year)? That we need to cut women’s access to birth control and cancer screenings via Planned Parenthood because they use 3% of their money nationwide for abortion services? And on that issue, that we need to force a woman who’s been raped to have a baby she doesn’t want? (Romney's tried changing positions on that last one, but look in the Republican platform and listen to Paul Ryan; it's still there. Also don't forget that when Romney ran for Senate in Massachusetts in the 1990's, he was firmly pro-choice.) Giving student loans back to big banks so they can soak fees off of the money loaned? Raising interest rates on those student loans? Cutting pell grants?
Do we need to go to fucking war with Iran?
All of that shit--and much, much more, some of which has no bearing on jobs but instead comes from antiquated religious and social fears--is what comes along with Romney’s tax plan by virtue of the wingnuts on the far right of his party that are driving the bus. Is it really worth it? Is it so good that we have to take all the other junk with it, just to give some super-rich people a huge tax cut?
Barack Obama says that we don't. And I agree with him.
Beyond that, unless Romney pulls some magical data about his enormous tax cuts and their stimulative impact out of his ass, his use of deficits and the national debt as a campaign tool is nothing more than an obfuscating tactic meant to stir up anger at incumbents. Nothing more. And if Romney truly wants to blame all of the people responsible for free-wheeling spending, he need look no further than his own running mate.
Tomorrow, we'll look at whether Romney's tax plan really stimulates the economy in Part 4: On Tax Cuts for "Job Creators".
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