Romney and Ryan’s Phony Deficit Reduction Plan

By picking Paul Ryan as his running mate, Mitt Romney has doubled down on a public-relations strategy of phony deficit reduction. Despite what you may have heard to the contrary, Republicans’ caterwauling about deficits and debt is eyewash to gull the public into believing they are serious fiscal stewards. Their rhetoric is intended to camouflage their real objective, which is to slash taxes for their wealthy contributors.

As most people ought to know by now but probably don’t—the print media have felled entire forests to analyze Romney’s comments about the Olympics, but have been far less talkative about his budget—the presumptive GOP nominee has proposed a tax-cut scheme that adds over $6 trillion to the deficit over the next 10 years. He claims he will offset those cuts by eliminating inefficient tax loopholes, which he conveniently does not specify. But there aren’t enough loopholes to do that. Most middle-class people do not consider the mortgage-interest deduction to be a loophole, and removing it would risk further weakening the housing market. Congressional Republicans recently refused to repeal the egregious tax deductibility of corporate jets, so it isn’t clear they’ll be willing to close even gaping holes. The nonpartisan Tax Policy Center analyzed Romney’s tax plan, employing the most favorable economic assumptions, and they found—surprise!—that it could not be made revenue neutral without raising taxes on the middle class, even as it reduced taxes on the wealthy.

So is Ryan any better? Everyone knows by now that Ryan’s budget would replace Medicare with a voucher whose value declines over time. His cuts to Medicare and other health care programs would total $2.4 trillion over the next ten years. But despite that, and despite all the domestic spending cuts in his plan, Ryan still doesn’t get anywhere close to balancing his own budget. That is because even by his own estimate, he reduces revenue by $2 trillion over the same period. His budget relies on optimistic economic assumptions about the stimulative effects of tax cuts, and many of his rate reductions are similarly supposedly offset by unspecified loophole closings, so the real revenue loss would be much greater.

It is not just that he cuts taxes, it is how Ryan cuts taxes that gives us a clue as to the Republican agenda. The Center for Budget and Policy Priorities estimates that under his plan, those making less than the princely sum of $20,000 a year would have an average tax increase of $193 annually, while those earning more than $1 million would reap an average tax cut of $265,000. When, under the Bush administration, the capital gains rate was lowered to 15 percent, it not only exacerbated the growing income disparity in America (many of the rich earn most if not all of their wealth from capital gains: that is why Romney pays an effective rate of less than 14 percent). The capital-gains rate cut also helped fuel the asset bubble that led to the greatest financial collapse in 80 years. Ryan’s budget would eliminate the capital-gains tax altogether. But, since we must all tighten our belts, he proposes to help offset the revenue loss by eliminating the child tax credit!

Ryan, like all Republicans, regularly votes for balanced-budget amendments. They are cheap and easy votes, because they command the government to balance the budget without bothering with the messy details of how one would do that. But his own budget does not come close to balancing within the next 10 years, despite optimistic assumptions and magic asterisks. When he was a member of the Simpson-Bowles Commission, he voted against the commission’s plan to cut the deficit by $4 trillion, despite the fact that it employed the tax policy that Republicans say they favor: lowering the rates, broadening the base, and removing tax loopholes. (Full disclosure: in 2010 I had a minor role as an ad hoc Senate Budget Committee adviser to the Simpson-Bowles Commission staff). In the GOP’s eyes the cardinal sin of the commission’s plan was that it treated the income of a hedge-fund billionaire the same as it treated the earnings of a school teacher or ditch digger. The iron rule of Republican fiscal policy is that the rich must be favored, and deficits be damned.

Should GOP tax policies be implemented, we will have come some distance in this country toward the state of affairs in prerevolutionary France: wealthy aristocrats were exempt from taxes, while the poor were crushed with levies and fees. In case anyone has not noticed, that isn’t the most stable basis for running a country.