Cut taxes. Raise defense spending. Balance the budget. That, in a nutshell, is the promise of Mitt Romney's 162-page, 59-point economic plan. But if that refrain sounds hauntingly familiar, it should. After all, Ronald Reagan, George W. Bush and the leading lights of the Republican Party have been repackaging that same formula for over three decades.
But repeating the same falsehood—even for 30-plus years—doesn't make it any truer. As it turns out, that patron saint of small government Ronald Reagan tripled the national debt during his tenure, while Bush nearly doubled it again by January 2009. While their supply-side snake oil did not match the economic growth and job creation of periods of higher (even much higher) taxation, it did produce staggering increases in income inequality.
Now, Mitt Romney and his Republican allies are counting on Americans having short memories and bad math skills. For today's Party of Lincoln, the message for 2012 is clear: You can fool some of the people all of the time, and that's our target market.
From the beginning, even some of Ronald Reagan's water carriers were skeptical of his campaign pledge to balance the federal budget and cut personal taxes by 30 percent in three years. As William Kristol later admitted, "I was not certain of its economic merits but quickly saw its political possibilities."
Kristol was proven right on both counts. But as most analysts predicted, Reagan's massive $749 billion supply-side tax cuts in 1981 quickly produced even more massive annual budget deficits. Combined with his rapid increase in defense spending, Reagan delivered not the balanced budgets he promised, but record-setting debt. Even his OMB alchemist David Stockman could not obscure the disaster with his famous "rosy scenarios."
Forced to raise taxes 11 times to avert financial catastrophe, the Gipper nonetheless presided over a tripling of the American national debt to nearly $3 trillion. By the time he left office in 1989, Ronald Reagan more than equaled the entire debt burden produced by the previous 200 years of American history. It's no wonder that, three decades after he concluded "the supply-siders have gone too far," former Arthur Laffer acolyte and Reagan budget chief David Stockman lamented:
"[The] debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."When George W. Bush and Dick Cheney ambled in the White House in January 2001, they weren't shy about making that same point, albeit with a different spin.
(Continue reading below the fold.)
As Vice President Dick Cheney famously declared in 2002, "Reagan proved deficits don't matter." (Not, that is, unless a Democrat is in the White House.)
Inheriting a federal budget in the black and CBO forecast for a $5.6 trillion surplus over 10 years, President George W. Bush quickly set about dismantling the progress made under Bill Clinton. In 2001, Bush signed a $1.4 trillion tax cut, followed by another $550 billion round in 2003, the first war-time tax cut in modern American history. (It is more than a little ironic that Paul Ryan at the time called the tax cuts "too small" because he believed the estimated surplus Bush would later eviscerate would be even larger than predicted.) In keeping with Republican orthodoxy that "tax cuts pay for themselves," President Bush confidently proclaimed:
"You cut taxes and the tax revenues increase."As it turned out, not so much.
Federal revenue did not return to its pre-Bush tax cut level until 2006. As a share of American GDP, tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003. Analyses by the Center on Budget and Policy Priorities concluded, the Bush tax cuts accounted for half of the deficits during his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus—combined. By the time he shuffled out of the Oval Office in January 2009, President Bush bequeathed a $3.5 trillion budget and a $1.2 trillion annual deficit to his successor, Barack Obama. Which is roughly where things stand today.
To be sure, George W. Bush didn't balance the budget or prevent the national debt from ballooning to $11 trillion. As Ezra Klein noted, "What's also important, but not evident, on this chart is that Obama's major expenses were temporary—the stimulus is over now—while Bush's were, effectively, recurring. The Bush tax cuts didn't just lower revenue for 10 years. It's clear now that they lowered it indefinitely." And those Bush tax cuts currently set to expire at the end of 2012 didn't just reduce the total federal tax burden to its lowest level in 60 years, but also helped produce the greatest income gap in 80. Meanwhile, even without the costs of the wars in Iraq and Afghanistan, core defense spending rose every year during the Bush administration and under President Obama as well.
Despite the broken promises of Reagan and Bush, Mitt Romney is doubling down on their impossible pledges to ramp up defense spending, slash taxes and "cut, cap and balance" the budget.
Now as then, the numbers simply don't add up. Gov. Romney is promising to boost the Pentagon's coffers by $2.1 trillion the next decade, while cutting taxes by trillions more during the same time frame. (The Center for American Progress estimated in January that 60 percent of Romney's tax cut benefits would go to the richest 1 percent of Americans; it's no wonder David Cay Johnston called the scheme "George W. Bush's plan on steroids.") To try to pay for it, Mitt doesn't just want to slash domestic discretionary spending, hand over a smaller Medicaid program as block grants to the states and turn Medicare into a voucher program. Without specifying which ones, Romney claims he will close some of the hundreds of tax deductions and loopholes which each year cost the Treasury over $1 trillion in lost revenue. And to top it all off, would-be President Romney insists his plan to lower rates while "broadening the base" is "revenue neutral" while "we make sure that the top 1 percent keeps paying the current share they're paying or more."
Like the sun rising in the west and setting in the east, Romney's plan cannot work. Put another way, President Romney will surely break his promises because, taken together, they simply cannot be kept.
Let's start with Romney's surreal defense budget. As the Boston Globe noted, Romney not only fails to realize savings from the end of the U.S. war in Afghanistan, but promises Pentagon increases that simply don't square with his pledge to "Cut, Cap and Balance" the federal budget:
Under next year's budget, defense spending is projected to be about 3.2 percent [of GDP] - yet Romney has stuck by his 4 percent vow. Put another way, that means Romney proposes spending 61 percent more than Obama at the end of a decade-long cycle, according to the libertarian Cato Institute.While gutting the social safety net in order to fund yet another tax cut payday for the gilded-class, Romney wants to expand U.S. defense spending to its highest level in decades. All told, he would lavishly expand Pentagon spending by $2.1 trillion over the next decade:
Enacting such an increase at the same time that Romney wants to slash taxes and balance the budget could cost trillions of dollars and require huge cuts in domestic programs. As Romney's website puts it matter-of-factly, "This will not be a cost-free process."
At the same time, Romney's massive tax cut windfall for the wealthy makes George W. Bush look like Karl Marx.
Mitt not only wants to make the Bush tax cuts permanent, but has proposed a 20 percent across the board tax cut that would lower 2012's expiring top rate of 35 to 28 percent. He would also end the alternative minimum tax (AMT) and trim the corporate tax to 25 percent. (Mitt also wants to eliminate the estate tax, a move which could theoretically deliver the Romney heirs an $80 million windfall.) As Think Progress explained earlier this year:
Romney's claim that his plan would promote job and economic growth while reducing the deficit is also likely false. The Bush tax cuts were promoted under the same guise, only to blow a $2.5-trillion hole in the federal budget that was accompanied by worst performance of any post-war expansion" for growth in investment, GDP, and job creation. Romney's tax cuts are even more expensive, clocking in at a cost of more than $10.7 trillion over the next decade and reducing revenue to a paltry 15 percent of GDP, according to Linden. Balancing the budget on those terms, as Romney claims he will do, would be next to impossible.And surely impossible, that is, because of his dual commitments of revenue neutrality and no net tax cut for the rich.
As a recent analysis by the nonpartisan Tax Policy Center revealed, the chart above actually understates just how regressive Romney's tax plan really is. Even after assuming the closure of tax loopholes and deductions which disproportionately favor the rich and "dynamic scoring" by which lower taxes magically produce accelerated tax revenue growth, TPC forecast that President Romney would effectively cut taxes only for the richest five percent of earners while increasing the tax bill for the other 95 percent of Americans:
It's no wonder Ezra Klein concluded:
"The size of the tax cut he's proposing for the rich is larger than all of the tax expenditures that go to the rich put together. As such, it is mathematically impossible for him to keep his promise to make sure the top one percent keeps paying the same or more."As it turns out, it's also mathematically impossible for Mitt Romney to "cut, cap and balance" the budget. Even with draconian cuts to Medicare, Medicaid and other non-defense, non-Social Security programs, Romney can't get there from here. As the Washington Post explained in its discussion of an analysis by the Committee for a Responsible Federal Budget earlier this year, "until the campaign offers a more specific plan, Budget Watch analysts said Romney's entire framework would add about $2.6 trillion to the debt by 2021." (As Think Progress and the Washington Post's Lori Montgomery and Ezra Klein all explained, that's likely a conservative estimate.)
In words and in pictures (above), CAP put it this way:
The various fiscal promises Gov. Romney makes simply cannot work together. He cannot simultaneously cut taxes as he's proposed, increase defense spending, protect Social Security and Medicare for current and near-future retirees, and also balance the budget. It is mathematically impossible.Of course, Americans have heard all of these broken promises before from Republican presidential candidates. And now, as Ronald Reagan often said, "here we go again." Or as George W. Bush so eloquently put it:
"Fool me once, shame on ... shame on you. Fool me—you can't get fooled again."For all of our sakes, let's hope not.
(For more background, see "10 Things the GOP Doesn't Want You to Know About Taxes.")
UPDATE: Some of the commenters (h/t mumtaznepal) have rightly noted that despite GOP mythology to the contrary, the U.S. economy does much better under Democratic presidents. For data and charts showing why you should vote Democratic if you want to live like a Republican, see ”Democrats crush Republicans as capitalists in the White House.” Given their dismal performance as stewards of the economy, that means all tax-cutting Republicans have succeeded in doing is draining the U.S. Treasury in order to give money to the wealthiest Americans who need it least.