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.