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ThePlumLIneGS whorunsgov plumline
Posted at 01:26 PM ET, 09/14/2012

Romney’s magical thinking about the deficit

Mitt Romney made it pretty clear today on Good Morning America: his tax plan (and his overall budget plan) will rely on two parts pixie dust, three of Jeannie’s blinks, a pinch of technobabble from Geordi La Forge, and something about the Elder Wand (which, I have to confess, I’ve never quite understood). That is, it’s all magic and fiction.

Specifically, Romney confirmed that he will balance the barget largely through economic growth:

GEORGE STEPHANOPOULOS: You cite your own studies. But one of the studies you cite by Martin Feldstein at Harvard shows that to make your math work, it could work, if you eliminate the home mortgage, charity, and state and local tax deductions for everyone earning over $100,000. Is that what you propose?
MITT ROMNEY: No, that’s not what I propose. And, of course, part of my plan is to stimulate economic growth. The biggest source of getting the country to a balanced budget is not by raising taxes or by cutting spending. It’s by encouraging the growth of the economy. So my tax plan is to encourage investment in growth in America, more jobs, that means more people paying taxes. So that’s a big component of what allows us to get to a balanced budget.
GEORGE STEPHANOPOULOS: But his study, which you’ve cited, says it can only work if you take away those deductions for everyone earning more than $100,000.
MITT ROMNEY: Well, it doesn’t necessarily show the same growth that we’re anticipating.

Well, there you have it. Mitt Romney’s not going to balance the budget by raising taxes or by cutting spending; we’re going to have presto-chango-magico growth. Exactly the way that Ronald Reagan and George W. Bush “balanced” the budget by projecting magical growth rates.

As far as his tax plan is concerned, the fiction here is even more extreme. First of all, Romney is explicitly disavowing the key study he’s been citing to justify the math in his proposal. Remember, Romney votes to lower rates by 20 percent; to do it without raising middle class taxes or touching a bunch of tax preferences he supports; and to remain revenue neutral. The numbers say that can’t be done — there simply aren’t enough deductions to eliminate for the wealthy to recover the money lost from lower rates, and so Romney would have to violate one of his principles. Martin Feldstein basically provided an out for him, as Stephanopoulos noted (and good for him for this one), by defining “middle class” as income under $100,000, although if he adopted Feldstein’s version Romney would be endorsing a massive tax increase on those between $100,000 and $250,000 income in order to fund tax breaks for the very rich. But whatever the merits of that trade-off, Romney is rejecting it, too.

Instead, it’s very simple: what Romney intends to give up is revenue neutrality. Romney’s tax “reform” will consist mainly of just lowering rates, perhaps while closing a few symbolic deductions. It will produce massively increased deficits, which Republicans will ignore until the Democrats are back in the White House, at which point it will be a national emergency.

Okay, that last bit is just my guess. But the rest of it? Mitt Romney himself is telling us that he’s going to rely on magic to achieve revenue neutrality in his tax plan and to balance the budget. I'd say we can trust him on this one.

By  |  01:26 PM ET, 09/14/2012

 
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