Republicans will knock a giant hole in the budget with a tax cut of $1.5 trillion, most of which goes to the rich and corporations. Rather than acknowledge their hypocrisy on the debt, they choose to misrepresent the facts.
This was the exchange on ABC’s “This Week” yesterday:
GEORGE STEPHANOPOULOS: One of the big questions is how much it’s going to cost. I know you believe the [sic] that this bill will eventually pay for itself. That is at odds with what the Joint Committee — Joint Tax Committee says and other independent analysts. I want to show that right now.
The Joint Tax Committee says this will be about a $1 trillion addition to the deficit, others say it’s even more. Even the conservative Tax Foundation says it will add about $500 billion to the deficit.
I know you believe it’s going to pay for itself, but what evidence do you have to back that up?
MITCH MCCONNELL: Well, let me point out there are a whole lot of economists who think that it will pay for itself. And let me tell you how that is done. The economy would have to grow 0.4 percent over the next 10 years to fill this gap that you’re referring to. That is not a dramatic improvement. We think you’re going to get a lot more growth than that. So, I’m confident this is not only revenue neutral to the government, but actually it’s very likely to be a revenue producer.
STEPHANOPOULOS: That may be your confidence, but it also may be misplaced. You know, we have seen those independent analyses. We’ve seen the official scorekeeper for the congress, the Joint Committee on Taxation, say it is going to add to it.
So what if you’re wrong?
MCCONNELL: Well, look. I don’t think we are wrong. And even Senator Corker, who ended up in the end being somewhat skeptical, along the lines that you’re talking about, had originally agreed to a budget with a $1.5 trillion deficit over ten years, but he was also convinced that a 4 percent growth rate was pretty darn achievable, particularly when you consider the way we are incentivizing businesses to grow and expand.
And we also, by the way, doing a lot the to keep our jobs from going overseas by making sure the business tax rates are competitive in this global economy. And of course we didn’t leave behind the middle class either. The average taxpaying family is going to get $2,200 tax cut. We double the standard deduction. We increased the child care credit. This is very much oriented toward not only middle class tax relief, but also making sure our jobs are still here, and the jobs are in the United States rather than somewhere else.
STEPHANOPOULOS: Except as you know, senator, many of those individual tax cuts expire after several years.
MCCONNELL: Well, that will depend on what the congress decides to do six years from now. Many of these tax relief measures, in my judgment, if there still a Republican government, will be extended.
STEPHANOPOULOS: But if that happens, then the cost is even higher.
Then there was this over at “Meet the Press”:
CHUCK TODD: Alright, if the debt is unsustainable at $14 trillion, how do you, how did you make yourself comfortable voting for something that’s going to increase the deficit? This tax bill we’re at 20.6 trillion now and the best estimates saying it’s going to even the best estimates of dynamic scoring that we could still find still add half a trillion dollars to the deficit.
SEN. SUSAN COLLINS: Economic growth produces more revenue and that will help to offset this tax cut and actually lower the debt.
CHUCK TODD: Where’s the evidence? Where, explain to me. Find a, find a study that actually says what you’re claiming.
SEN. SUSAN COLLINS: Let me–
CHUCK TODD: It doesn’t exist.
SEN. SUSAN COLLINS: Let me do that. First of all if you take the C.B.O.’s formula and apply it four to four tenths of one percent increase in the GDP generates revenues of a trillion dollars, a trillion dollars. Even the joint committee on taxation has projected that the tax bill would stimulate the economy to produce hundreds of billions of additional revenue. I’ve talked four economists, including the Dean of the Columbia School of Business and former chairs of the councils of economic advisors and they believe that it will have this impact. So I think if we can stimulate the economy, create more jobs that that does generate more revenue.
CHUCK TODD: But why isn’t there a single study? I’m going to show you three studies that we have, sort of a liberal one, a centrist one, and a conservative one right up there. The most conservative one, the most pro-economic growth argument, still adds $516 billion to the deficit over ten years.
SEN. SUSAN COLLINS: Well, talk to economists like Glenn Hubbard and Larry Lindsey and Douglas Holtz-Eakin, who used to be head of the C.B.O. And they will tell you otherwise. So I think you will find that economists just don’t agree on this.
I contacted Hubbard to ask whether he told Collins that the tax cuts pay for themselves. He insisted, “That isn’t what she said and isn’t what I said.” Actually, she said the bill would lower the debt. He suggested she might have been referring to a letter Hubbard and other economists signed. But that said something else entirely: “Would the proposals raise current and future economic activity and generate federal tax revenue that would reduce the ‘static cost’ of the reforms? This letter explains why we believe that the answer to these questions is ‘yes.'” Hubbard reiterated to me: “I gave her my own growth estimates from the letter. I have not done a revenue estimate of the tax plan.”
Likewise, Douglas Holtz-Eakin told me that “we told her that pro-growth policy mattered, would help people and would offset (but not eliminate) the static budget loss.”
I asked Collins’s office whether the senator misspoke. Her communications director, Annie Clark, replied, “Senator Collins did not mean to state definitively that the tax cut would pay for itself — I can see why you would think that reading the transcript, and, to be clear, she does believe that the cuts could potentially pay for themselves.” To be clear, however, Holtz-Eakin and Hubbard didn’t tell her that — and that was wise, because it’s not in the realm of possibility.
The spokeswoman said that Collins just isn’t giving any “guarantee” about the cuts paying for themselves. Clark continued: “She does believe that growth needs to be our priority, and that tax cuts are an important part of a pro-growth strategy. She believes that growth from these tax cuts has the potential to offset the cost of the cuts — extrapolating the CBO numbers, only .4% of additional growth over the decade would add $1 trillion in revenue.”
Now we’re back to the lack of support for the tax-cuts-pay-for-themselves proposition. This raises the question as to whether Collins and McConnell misunderstand the advice they get, choose to cherry-pick what they are given or simply don’t want to fess up that they’ve abandoned fiscal sanity in search of a political win and to soothe donors. The most generous interpretation is that they are operating with unsupportable optimism that these cuts will do something no other tax cuts have ever done– pay for themselves.
The faux deficit hawks who voted for the bill may have convinced themselves of something that just isn’t so. Now, however, there is no excuse. It’s clear what the economists they rely upon actually believe. Lawmakers should redesign the bill in conference to make it truly tax-neutral — if they still adhere to their anti-debt beliefs. If not, they should have the nerve to admit that they are ladling a ton of new debt on the backs of future generations.