Utter Nonsense: More Voodoo Economics

During the first debate between himself and President Obama, former Massachusetts Governor and Republican Presidential Candidate Mitt Romney said that he would not enact any tax cut that would add to the deficit.

In an October 4th article, Bloomberg/Businessweek Economics Editor Peter Coy pointed out that the non-partisan Tax Policy Center has done the math and the math says that you can't cut taxes by 20% without increasing the budget deficit UNLESS you also cut spending by the same amount.

And that's the problem.  Governor Romney said that he would not enact any tax cuts that would add to the deficit, but he didn't say that he would not reduce the federal budget in order to balance the budget against the reduced revenues....and that's exactly how he plans to balance the budget, by cutting programs, but he won't tell us how.

The problem facing anyone who attempts to analyze this the data is that there are so many differing versions of the budget - the Democratic budget, the Republican Budget, and the actual enacted budget - and so many different interpretations of the data by various sources that it becomes difficult to figure out what's really going on.

But this much is clear:  it is impossible for Romney, or anyone else, to both cut taxes and NOT increase the annual deficit without cutting deeply into essential government services.

Less obvious is the fact that ONLY places Romney can save enough to balance his budget are the federal entitlement programs:  Social Security and Medicare. 

Governor Romney's tax cut proposals would result in the loss of $485 billion in tax revenues in 2013 according to most estimates.  The Romney campaign doesn't dispute this, but they do dispute  President Obama's assertion that this tax cut would result in a $5 trillion shortfall over a ten year period because President Obama's estimate of the tax shortfall doesn't take into account the economic growth that would result from the Romney tax cuts.

This is the trickle-down theory coming back to haunt us again.  If you cut taxes, the revenues will flow from increased Gross Domestic Product, which is a false conclusion based upon a set of false assumptions....

But let's stay with the question of where these budget cuts would come from so we can see where we would be going under a Romney administration.

Based on a zero growth budget that uses the same figures as the 2012 budget, a Romney administration would have to cut $485 billion from the 2013 federal budget.

 Governor Romney also wants to increase military spending by $2.1 trillion over the next ten years. This would add $210 billion to the federal budget for the Department of Defense in 2013, bringing the total amount that would have to be cut from other departments to  $695 billion in order to keep the budget in balance. 

Therefore, in order to determine the exact effect of Governor Romney's tax cut plan on the federal budget, he has to figure out how to cut $695 billion from the balance of the 2013 budget after deducting the $716.3 billion Defense Department allocation for 2012. 

You have to deduct the Defense Department Budget from the 2013 federal budget because, by calling for an increase in defense spending, Governor Romney has already placed that department off-limits to budget cutters.  No good businessman cuts the budget to a department only to restore the funds to the same department at the same time. 

Subtracting $716.3 billion from the $3.79 trillion 2012 budget leaves $3.079 trillion from which Romney will have to cut his $695 billion to honor his pledge of deficit neutrality.  Here's the problem:  That amounts to an across the board budget cut for all other federal departments of  22.57%  and here's what that would do to the federal budget:

 As you can plainly see, in order to cover $485 billion in tax cuts, plus $210 billion of increased defense spending, Governor Romney has to completely defund ALL of the items in red ink. 

Just in case you happen to have a monochrome computer (they still exist), this means cutting the allocations for General Science, Space and Technology, Energy, Natural Resources and the Environment, Agriculture, Commerce and Housing Credit, Transportation,  Community and Regional Development, Education, Training, Employment and Social Services, the Justice Department, and funding for the operation of the government itself.

This isn't some kind of shell game. These are plain facts.

It is impossible for Governor Romney to both cut taxes, increase defense spending AND honor his promise not to cut Social Security without making such Draconian cuts in the federal budget that there would be no federal government left to govern, nor anything to govern in the midst of the mass chaos that would ensue from these cuts.

Let's take a look at some of the ramifications of the cuts.

If you cut out Commerce and Housing Credit, Fannie Mae and Freddie Mac would both go away, along with HUD, the FHA, and the USDA.  The net result would be the complete collapse of the mortgage market, along with a corresponding collapse in real estate values, home sales, new construction starts, and the jobs that go along with them.

Couldn't the private sector take over these functions?  Absolutely, but the rates they would charge for the higher risk, lower yield loans these agencies underwrite would freeze up the real estate markets because the ordinary consumer simply could not afford those rates.

Defunding the Energy Department would mean doing away with the Nuclear Regulatory Agency, leaving nuclear power plant operations unsupervised in the United States.

Doing away with the Administration of Justice budget would kill off the Federal Bureau of Investigation, Homeland Security, Customs Department, the Border Patrol, and the Internal Revenue Service. It would also defund the Supreme Court and the rest of the federal court system, along with the U.S. Marshals Service, which is part of the Federal Court System. 

Killing off the Department of  Agriculture would mean the end of all food inspections, but it would also mean killing off all federal farm subsidies.

The list of unintended consequences goes on and on and on.

The first Republican rebuttal to this analysis will be that they don't have to cut everything in those departments, that they could cut just the fat and leave the lean....but there is no lean left in this imaginary budget.

When you impose the combination of budget cuts and unnecessary military expenditures incorporated into Governor Romney's tax and budget proposals, you have to cut the highlighted government departments IN THEIR ENTIRETIES.

These are 100% defunding cuts.  There's no room left to negotiate to keep the FBI or the Air Traffic Controllers, or anything else in the affected departments....and it's still not enough.

Under the best case scenario, which means giving the budget credit for $98.8 billion worth of offsetting receipts (funds earned by the government other than tax revenues), these cuts only amount to 18.927%.   Without the offsetting revenues, the cuts listed come to just 16.332% of the federal budget.

These facts are well known to both campaigns, but no one is talking about them because there are no simple answers to this dilemma.

What are you willing to give up?  Health care, Medicare, unemployment insurance, Social Security, Veterans Benefits or $210 billion in increased defense spending?

Try doing away with the $210 billion defense appropriation that Governor Romney wants, and you can balance the budget by eliminating all of the departments in red ink, but that still effectively destroys the federal government of the United States....unless you also put all of the social welfare programs on the table as well....or you just give up the budget cuts as a very, very, very bad idea.

Both parties know this, but both parties are pandering to the electorate.  Romney says he's going to cut taxes, so Obama has to say that he's going to cut taxes too.

Here's the truth:  The only justification for those tax cuts is an unproven and highly suspect economic theory which is based on nothing more than wishful thinking.

The proposed tax cuts will only stimulate the economy at the expense of the destruction of our way of life as it is now, with no promise that what replaces it will be any better.  Approximately 1.2 million of the 2.1 million federal employees would be put out of work, and 780,000 of those remaining would be in the military.

In other words, if Governor Romney were actually to impose his solution on America, we would end up under military dictatorship because the military would be the only government left.

Views: 225

Comment by tr ig on October 7, 2012 at 6:40pm

I'm actually writing a little political thing... 

an expert I heard interviewed on NPR (PUBLIC radio.. haha) said that if we freed up our ridiculous military spending, that that alone would stimulate the economy back to boom times. That Romney wants to actually INCREASE that spending means one thing.. to me. The Military Industrial Complex would love to see this guy as prez. They don't care just where the money comes from. They just want it. Bush gave 'em plenty with two wars and a tax cut, and they want more more more. Romney/Ryan and their disciples would like to see the defense fucking increase, and deficit run up by the Iraq/Afghan wars (and tax cuts) paid for by the dismantling of hard fought for social programs. Anyone that doesn't see that is naught but a fool in my estimation. As far as homeland security, they can go ahead and cut that multitude of programs. The "homeland" (memories of Hitler.. zieg heil) will be just fine, especially as soon as we quit invading sovereign nations . . . and quit being the assholes of the world. 

Comment by koshersalaami on October 7, 2012 at 6:57pm

Glad to see the numbers.

Cutting taxes didn't increase business the last time, so that's a really bad assumption on the part of the Republicans. This was a series of lies from start to finish.

My guess is that you'll get a lot more action on the other site but I'll comment here because I'd like to see this site strengthened.

Comment by Alan Milner on October 7, 2012 at 7:29pm

Trig, the expert you heard on NPR is an economic idiot.   Most professionally trained economists are.  The way you get ahead in economics is not by challenging their cherished assumptions.   While there is no legitimate reason to  INCREASE the defense budget, there's no easy way to cut defund the defense department either.   There's a five to one ratio between defense spending and the percolation effect through the economy.   Four out of every five dollars spent on defense goes into the private sector to purchase capital equipment, weapons system, equipment, supplies and ammunition, not to mention the salaries that the defense department employees pour back into the economy every day.   The problem with beating swords into plowshares is that the companies who make the swords don't make the plowshares, and shuttering the companies that produce war materials would push us over the edge into a depression.  It will take a long and gradual process to shift defense spending into infrastructure development because right now the companies we need to pick up the slack don't exist.  Try spending $700 billion on construction in one year.  In January of 2009, the Political Economy Research Institute estimated that cost of upgrading the US infrastructure to its full potential would require up to $148 billion per year to reach maximum capacity.  So, in my imaginary universe, that would the maximum cutback in military spending because any further cutbacks would have an adverse effect on the economy. 

Comment by Alan Milner on October 7, 2012 at 7:39pm

Kosh, I am trying to do the same thing.  I agree with both of your statements. The game that the Republicans are playing is so reminiscent of Hitler's tactics in Germany that I actually shudder when I look at Romney or Ryan.  American democracy died somewhere during the past twenty years, and we didn't notice until it was too late....and it is too late.   If I am right, and the voter suppression effort is successful in the battleground states, we may very well see the Republicans steel a second election in 12 years right in front of our eyes. Political beliefs now trump legal principles, because the legal principals have lost their principles.   The American people are still too comfortable to rise up against this oppression, myself included.  We will take less and less and less and be happy because we don't get even less than that. 

Comment by tr ig on October 7, 2012 at 7:46pm

Alrighty then Alan. And here I thought I was agreeing with you!

I'll assume you'd be ok with no Romney increase in defense spending (and no war with Iran)? That you agree there is no sensible reason to have a military the size (budget) of the ten largest countries behind us, combined (or whatever that statistic is)? I'm thinking it would be easier than you, and other, cough, experts say, to "beat the swords into plowshares" but then again I'm no genius on the subject.

Comment by Alan Milner on October 7, 2012 at 8:00pm

I would love to agree with you, but this reflects the essence of Eisenhower's fears, that we would be come so addicted to the boost that defense spending gives our economy that we simply cannot do without it.  I  think that Romney's defense budget increase is nothing more than a bargaining chip that he intends to trade for Democratic concessions elsewhere in the budget.  This will unfold after he's been "elected" and when he has to negotiate with a Democratic Senate to get anything done.   And just for the record, I believe, we spend more on defense than the next 26 countries combined, not just ten.  

Comment by tr ig on October 7, 2012 at 8:10pm

ah, 26 countries. So... "we" are addicted to the boost (my son gets paid a pretty damned decent wage to sit on his ass in Okinawa for the Navy which boosts my economy because I don't have to feed him)--- we, need to get un-addicted then, even if that means some re-appropriation of funds. If not in a quick hurry, then in a slower measured way, but I'd say it needs to be done. 

Also, don't agree that the worst will happen.. Romney actually being "elected." Please, let's keep the doom and gloom to a minimum on that subject unless/until it happens. I don't see it... this time.

Comment by Alan Milner on October 8, 2012 at 5:13am

Slick Mitt is exactly that, slick.  As one salesman watching another, I have to tip my hat to his ability to sell sand to a Saudi, and make him think that the camel shit in the sand is actually a benefit rather than a liability.  I am also miffed that I got EPs on OS for my last two posts and this one - the most important piece I've ever done - isn't drawing much attention.  

Comment by Myriad on October 10, 2012 at 5:04am

Yeah (just commenting on the comments, having read - and commented - on your post on Open), it has occurred to me that stopping the wars and bringing home troops (not just from active areas, but all those in Korea and Germany and wherever) would be an economic mess - a whole buncha people newly out of jobs.  Tho 'fortunately' a number of them will be so damaged physically or emotionally that they won't be looking for jobs...  And tho Eisenhower had a point in his fears, still in a way it was the war effort of WW2 that revitalized the American economy way past FDR's efforts.  How can we turn that off?

Well, in a nice efficient dictatorship of the benevolent persuasion, the change-over to infra-structure and to green energy and public education, transportation, research, etc. etc. could be done - just ('just') a matter of throwing money, focus, government attention and other such unlikely things at it.  Ataturk - attaboy.

In a land of freedom (or 'freedom') and 'democracy', the industrial/military complex and the Wall Street people get to do what they want...

Comment by Daniel Geery on October 13, 2012 at 9:25am

Medicare and Social Security are not "entitlements." We pay in and take out. I would compare them to a trust fund or large insurance fund. On insurance, the larger the pool the better the deal for all members.  (My website, www.voteutah.us)


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