Since 1980, having a Republican hold the office of president has been associated with deficits and an increase in our debt, as a percentage of GDP. My conservative friends tell me this time is different. If elected, a GOP president really will address our debt issue this time. So, let us look to the Tax Policy Center which has been keeping track of Romney’s promises. What will they do to our debt?
Romney’s initial tax plan was blasted by many Republicans as too cautious, so last week he rolled out a far more ambitious proposal. Instead of simply making the 2001/2003 tax cuts permanent , abolishing the estate tax, eliminating taxes on investment income for those making less than $200,000, and cutting corporate tax rates, Romney threw the long ball.
On top of his original plan, Romney proposed cutting all ordinary income tax rates by 20 percent and eliminating the Alternative Minimum Tax. While Romney said he’d offset the lost revenue from these new tax cuts by trimming deductions, credits, and exclusions, he did not say how.
The cost of the new Romney plan? For 2015, when changes would be fully effective, he’d add nearly $500 billion to the budget deficit, even after extending the 2001/2003/2010 tax cuts. If the tax cuts are allowed to expire, he’d add $900 billion to the deficit in 2015.
As the Tax Policy Center (author Howard Gleckman) points out, Romney has made vague suggestions about closing loopholes or cutting spending. This sounds like every other GOP candidate since 1980. The only thing we can really count upon in a GOP budget is tax cuts, especially for the wealthy. Yes, the Tax Policy Center found those.
For instance, those making $1 million or more would enjoy an average tax cut of 8 percent of income or roughly $250,000 (relative to a world where the Bush/Obama tax cuts remain in place) compared to an average cut of less than 4 percent of income, or $2,900, for all households. Because Romney would repeal President Obama’s 2009 tax cuts, those making less than $10,000 would pay an average of $100 more in taxes and only about 11 percent would get any tax cut at all.
Romney would cut taxes for nearly all households making between $50,000 and $75,000 but by far less than those with higher incomes. On average, those making $1 million or more would see their after-tax incomes rise by nearly 12 percent while incomes of households earning $50,000-$75,000 would rise by only about 2 percent.
Romney’s promise to make his new system as progressive as today’s puts him in a difficult policy box. Which tax preferences aimed at upper-income households could he dump to keep the code progressive while not adding hundreds of billions to the deficit?
Raising rates on capital gains and dividends might help, but he’s already promised to cut them to zero for those making $200,000 or less and hold them at 15 percent for everyone else. Eliminating or restructuring tax breaks for retirement savings, mortgage interest, and employer-sponsored health insurance could make Romney’s low-rate system more progressive, but these changes would be hugely controversial. Besides, while they’d target many of the merely rich, they wouldn’t matter much to the uber-wealthy who benefit most from Romney’s rate cuts.
I see nothing here to convince me that this time is different. But, let’s not stop here. Romney has claimed that he will save $100 billion a year by repealing the ACA (Obamacare). It is understandable that he would make this claim, after all, he is trying to get elected. However, the numbers do not work as Ezra Klein notes.
In 2016, Mitt Romney has promised to cut $500 billion from the federal budget. One way hell pay for it is “with the easiest cut of all: Obamacare, a trillion-dollar entitlement we don’t want and can’t afford.” So let’s say he repealed the Affordable Care Act in full. As you can see in the above graph, or in this report, in 2016*, that would cut spending by $110 billion, or a fifth of Romney’s promised total.
But if you repeal the Affordable Care Act, you also repeal the measures it uses to pay for itself. In 2016, that means repealing $35 billion in tax increases and $65 billion in spending cuts — most of which are the Medicare cuts that Romney routinely attacks on the campaign. Subtract them from the spending and now Romney’s only saving $10 billion, or 1/50th of his promised total, by repealing the Affordable Care Act.
Perhaps Romney made this error because the GOP is used to increasing spending (Iraq War, Medicare Part D) without paying for it?