Romney the shape shifter

[Former_Member]

(US News) Mitt Romney's tax plan gets curiouser and curiouser. 

The basic concept behind the plan is pretty simple. The Republican presidential nominee wants to cut each of the six federal income-tax rates by one fifth, so those in the 15 percent bracket would pay 12 percent, those in the 25 percent bracket would pay 20 percent, and so on. He'd also eliminate the estate tax and kill or reduce other levies. President Obama, by contrast, would leave most rates where they are, while raising the rate for top earners by roughly 9 to 13 percent, depending on income. 

The problem with Romney's plan, of course, is that the federal government is already drowning in debt and can't take on more to finance sizeable tax cuts. The nonpartisan Tax Policy Center estimates that Romney's cuts would reduce federal revenue by $480 billion per year, which Obama has characterized as a $5 trillion tax cut (over 10 years, a rounded-up qualifier that Obama doesn't usually mention). Romney has addressed that, sort of, by saying he'd offset lost revenue by cutting or reducing a bunch of tax credits, deductions, and other loopholes, with one idea being to put a limit of $17,000 on the amount of deductions any taxpayer could claim in a given year. That would help a bit with the accounting, since some wealthy taxpayers claim deductions that help them avoid thousands or even millions of dollars in taxes. 

But new limits on deductions still wouldn't be nearly enough to fill the hole left by those big cuts in tax rates. So in his first debate with President Obama, Romney made a new pledge: He will approve no tax cut that adds to the deficit. 

This sounds like a guarantee that Romney's tax plan, if ever enacted, would do nothing to harm the government's finances or the overall economy, and would only help. It also relieves Romney of the burden of explaining all the details now, since he can wave away objections that his numbers don't add up by simply saying he'll make them add up when the time comes.

But the irony is that a plan to cut taxes that doesn't raise the deficit may have even less chance of ever becoming law than tax cuts that would require more borrowing. That's because markets and even some politicians may no longer tolerate the kind of legerdemain that it takes to cut taxes today while supposedly paying for them tomorrow. 

The only way Romney would be able to cut taxes as deeply as he wants, without adding to the deficit or simply offsetting a tax cut in one place with a tax hike in another, is to boost the economy so much that total tax payments would actually go up, despite lower rates. The idea that lower taxes stimulate growth is a core belief of many "supply-side" conservatives, even though there's plenty of evidence to the contrary. The federal tax burden today is the lowest in modern times, for instance, yet over the last decade that has corresponded with slowing growth rates and falling median income rather than the kind of boom that supply-side theory predicts. 

But let's say Romney is right, and lower taxes really will trigger an impressive economic revival. Under the best scenario, it wouldn't happen for a few years, yet tax cuts would reduce the federal government's revenue immediately. So the deficit would have to rise in the short term, at a minimum.

The only way Romney can claim that tax cuts wouldn't add to the deficit is to do "dynamic scoring," which relies on projections of falling deficits in the future, predicated on much higher growth rates than at present.

That's not so different from the just-trust-me growth rates that the Obama White House predicted in 2009 to justify its huge stimulus bill. The yawning gap between those White House predictions and reality is now one of Obama's biggest liabilities. 

In the past, Washington was able to hike up the deficit, despite dubious predictions about the lugubrious outcome, because there was wiggle room in the government's finances. That wiggle room is now nearly gone. Standard & Poor's cut the U.S. credit rating for the first time ever last summer because the national debt, now $16 trillion, is getting too big, and Washington has made no serious effort to do anything about it. Moody's has now said that it may also cut the U.S. credit rating before long. Eventually, those dings will raise Washington's borrowing costs, which could quickly become a very big problem that forces bigger tax hikes and spending cuts than Americans are prepared for. 

So if Romney were elected and he passed a tax plan that made deficits even bigger, the global investors who finance America's debt would have to decide if promises of declining deficits in the future seemed plausible. No doubt they'd study the administration of George W. Bush, who made basically the same promises in 2001 and 2003 when he passed his own tax cuts. Alas, there's almost no way to argue that those tax cuts boosted growth and improved the government's finances. On the contrary, the national debt rose by about $3.5 trillion under Bush, who left office, as we know, amid a Depression-style financial meltdown. 

Some serious economists back Romney's claim that he can cut taxes without raising the deficit, including Glenn Hubbard of Columbia, Greg Mankiw of Harvard, and John Taylor of Stanford. But markets won't react to such a plan by listening to what economists say. They'll look to history to predict the future, and turn the screws when rosy projections don't materialize. It's a wonder that hasn't happened yet.

[Former_Member]

Looky here.... Now he is changing his stance on abortion! What a serial panderer!!

http://politicalticker.blogs.cnn.com/2012/10/10/romney-abortion-comment-draws-democratic-criticism/

[LocoBead]

"Some serious economists back Romney's claim that he can cut taxes without raising the deficit, including Glenn Hubbard of Columbia, Greg Mankiw of Harvard, and John Taylor of Stanford."

But, we should believe a blogger with U.S. News and World Report, who happens to have a bachelors degree in English and economics, and makes a living from his writing. Sure......

[Former_Member]

You can find economists to back any plan pretty much. However, there are far more that say his plan is pure fantasy. And as the article points out, history speaks louder than words and that will be what the market pays attention to.

[Former_Member]

The Economist: Experts agree on Obama plan over Romney’s

Former vice presidential economic advisor Jared Bernstein and Columbia University Professor Jeffrey Sachs examine a new report in The Economist that once again says the numbers for Mitt Romney’s tax cuts and Paul Ryan’s budget plan just don’t add up.

http://video.msnbc.msn.com/martin-bashir/49349744/#49349744

[Former_Member]

"The problem with Romney's plan, of course, is that the federal government is already drowning in debt and can't take on more to finance sizeable tax cuts. The nonpartisan Tax Policy Center estimates that Romney's cuts would reduce federal revenue by $480 billion per year"

[LocoBead]

GlassHouseSupplies from GlassHouseSupplies says
You can find economists to back any plan pretty much.
********
Yep, and you're only interested in those who say, "nay!" Fortunately, we've all learned over the past 3.8 years that Obama has NO plan to cut the deficit.

[Former_Member]

That's true in this case because the ones who say "nay" are the MAJORITY! :)

[LocoBead]

And, the majority is always right? So, if you can get 100 morons to say the sky is green, and 20 to say the sky is blue, that makes the sky green? How about that. And, not to get started on this topic...and I won't...If 80% of the population opposes gay marriage, that makes it the correct choice?

You libs are so funny.

[SerenaSmithLampwork]

i think you misunderstood your point, there.

[Former_Member]

obama has no plan to cut the deficit?

other than the initial stimulus plan and 'obamacare' which actually was a reorganization of monies, not addition - what has he added to the deficit?

http://www.washingtonpost.com/business/economy/ezra-klein-doing-the-math-on-obamas-deficits/2012/01/...

and a pretty graphic

http://www.washingtonpost.com/business/economy/adding-to-the-deficit-bush-vs-obama/2012/01/31/gIQAQ0...

[LocoBead]

You can flip it any way you choose, but the fact remains that there was a democratic majority in the senate from 2007-now...and a democrat in the WH since 2009. On top of that, we have absolutely no idea how much Obamacare will end up costing the country. So, your pretty little charts mean nothing. Obama promised to CUT the deficit in half, instead he has increased it. We're doing so damn well that our credit rating has been downgraded twice since Obama took office. Now, there's a precedent he should be real proud of.

[Former_Member]

the posting i did takes the projection all the way until 2017 - the length of obama's presidency if he wins a second term. i'm unclear why it's a flip of anything. sure he promised to cut it in half and he didn't. doesn't negate the positive impact and effect he's had on the current and future deficit numbers. the downgradjust might have a little to do with the monies already owed when he stepped in and the tide of the economy which no man can immediately reverse and by all accounts i've read - can't really control to the degree romney claims he can change it...the stock market and related financial impact is effected by global changes - not just what happens here in the US.


downgrade...

Causes of the Downgrade



Some speculators are interpreting the downgrade as a “wake-up call about our runaway debt” following the battle in Congress over the debt-ceiling and the ensuing deal.5 According to many sources, this is an extremely misleading interpretation. The main reason for the downgrade involved “the reckless and divisive battle that preceded” the deal.6

After the manner in which the deal was handled, S&P concluded that US governance and policymaking had become less stable, causing the downgrade. Therefore, the agency was not questioning the US’s ability to pay its debt, but instead its willingness. It is interesting to note that originally, S&P had provided suspect analysis that actually “overstated cumulative deficits by some $2 trillion, inflating the debt by 8% of GDP in 2021.”7 Although after correcting the mistake, they still downgraded the US, adding more weight to the “political brinkmanship” that preceded the debt deal.8

The general inspiration was the fact that the Republicans were willing to use voluntary default as a political tool. Instead of exercising responsible politics, the parties used toxic tactics to get their way. Even after the downgrade, the proverbial “blame game” continued as Democrats referred to it as the “Tea Party Downgrade” while Republicans called it “Obama’s Downgrade.”9

http://www.globalization101.org/why-can%E2%80%99t-we-be-friends-the-downgrade-of-the-us-credit-ratin...

and from their own mouths...


United States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks, Rising Debt Burden; Outlook Negative

Publication date: 05-Aug-2011 20:13:14 EST

We have lowered our long-term sovereign credit rating on the United
States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term
rating.

We have also removed both the short- and long-term ratings from
CreditWatch negative.

The downgrade reflects our opinion that the fiscal consolidation plan
that Congress and the Administration recently agreed to falls short of
what, in our view, would be necessary to stabilize the government's
medium-term debt dynamics.

More broadly, the downgrade reflects our view that the effectiveness,
stability, and predictability of American policymaking and political
institutions have weakened at a time of ongoing fiscal and economic
challenges to a degree more than we envisioned when we assigned a
negative outlook to the rating on April 18, 2011.

Since then, we have changed our view of the difficulties in bridging the
gulf between the political parties over fiscal policy, which makes us
pessimistic about the capacity of Congress and the Administration to be
able to leverage their agreement this week into a broader fiscal
consolidation plan that stabilizes the government's debt dynamics any
time soon.

The outlook on the long-term rating is negative. We could lower the
long-term rating to 'AA' within the next two years if we see that less
reduction in spending than agreed to, higher interest rates, or new
fiscal pressures during the period result in a higher general government
debt trajectory than we currently assume in our base case.

http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563



translation: congress and president can't be trusted to play nice...

[Former_Member]

"i'm unclear why it's a flip of anything."

------

Crazy, it's because your answer differs from her narrow con views. You better stop spewing facts or her brain might explode.

Doncha know? Obama single handedly destroyed our economy?

[Former_Member]

he's a hella powerful man for sure!

[Former_Member]

He's the Anti-Christ! :)

[Former_Member]

and which is worse...

- not cutting the deficit in half

or

- continuing to lie about the fact someone doubled the deficit black and white facts?

[Former_Member]

nah - he's just hitler incarnate!