Thirty-two years ago, George H.W. Bush called the idea that tax cuts would pay for themselves “voodoo economics.” He was right, but his party decided he was wrong: Bush was exiled from conservatism after raising taxes as part of the 1990 budget deal, and every Republican presidential nominee after him has offered huge tax cuts as a matter of course.
Mitt Romney, interestingly, is an exception to this rule: He’s not offering huge tax cuts. Or, to be more precise, he is offering huge tax cuts but he’s promising to pay for them by closing tax breaks and ending deductions. That is to say, he’s at least admitting that tax cuts cost money and need to be paid for. Given that his various numbers don’t add up, there’s a bit of pixie dust there, but it is, rhetorically at least, a turn away from voodoo and towards responsibility.
More worrying is what we might call Romney’s voodoo spending cuts: His promise that his promised spending cuts, despite being deeper than any in modern history, won’t hurt anyone, anywhere, at any time, for any reason. In fact – shades of supply-side economics here -- they’ll probably make government services even better.
Let’s start with the promises. Romney says he’ll cut federal spending to less than 20 percent of GDP by 2016, and he’ll do it without making cuts to Social Security or Medicare and while increasing spending on defense. To make that work, Romney will have to cut every other program in the federal budget – education, infrastructure, food safety, R&D, tax collections, FEMA, Medicaid, food stamps, national parks, etc – by 40 percent.
Those are massive, devastating cuts. But when you ask Romney to get specific, he talks about PBS and arts funding, as he did during the debates. And when Romney is left to his own devices, he doesn’t admit the reality of cutting federal spending at all. He hides all of it in vague plans to hand control over to the states.
“We will act to put America on track to a balanced budget by eliminating unnecessary programs,” Romney said in a speech last week, “by sending programs back to states where they can be managed with less abuse and less cost, and by shrinking the bureaucracy of Washington.”
So that’s it, then. We’re going to cut everything but Social Security and Medicare and defense by 40 percent or more and all it will mean is that we’ll cut unnecessary programs, states will manage the remaining programs more effectively and the bureaucracy will tighten its belt. Put like that, I doubt anyone will even notice.
Voodoo economics was the theory that cutting taxes would lead to so much more work and growth that the added revenue would let the tax cuts would pay for themselves. This has been roundly and widely debunked.
Voodoo spending cuts also have a theory behind them, and it’s the one Romney laid out: The federal government is so useless and inefficient that you can cut spending on these programs, send them to the states and watch the costs fall.
The evidence for this theory can be summed up in two words: Welfare reform. In a speech last Wednesday outlining the Romney-Ryan plan to reduce poverty, Rep. Paul Ryan mentioned “welfare” nine times, but didn’t refer to the ticket’s spending cuts even once.
Welfare reform doesn’t prove you can slash deep into the federal government without hurting families or services. The welfare program today is a shell of its former self. Where 68 of every 100 families living in poverty with children received welfare benefits during the booming economy of 1996, only 27 of every 100 received them in the slump of 2010.
The key, however, is that even as we shrunk welfare, we expanded other programs that help the poor, like the Earned Income Tax Credit, the Child Tax Credit, the Childrens’ Health Insurance Program, and food stamps. The theory of welfare reform wasn’t a theory of cutting federal spending so much as a theory of redirecting it to programs that did more to encourage work.
The big program that Republicans want to “welfarize” is Medicaid. Paul Ryan’s budget cuts it by about $1.7 trillion over the next decade and then hands to the states so they can use their newfound “flexibility” to improve the program. But Medicaid already pays doctors less than Medicare or private insurance and it has seen slower per-capita spending growth over the last decade. The idea that there are huge efficiencies in a health care program that’s already spending less and growing slower than most everything else out there is folly. The Kaiser Family Foundation projects that almost 40 million Americans could lose coverage.
And if Medicaid is a bad example of a program that could be turned over to the states so they can do more with less, FEMA is an even worse one. And yet, when Romney was asked during one of the debates whether he would cut disaster relief, he said he would, and a Romney spokesperson clarified to the Huffington Post that he meant he wanted to further hand control over to the states.
This shouldn’t need to be said, but spending cuts have consequences. If it was all just waste and fraud, someone else would have done it. If the states were really such genius administrators – and seriously, think about how your state government works, do you really detect such brilliance? – then past presidents would already have availed themselves of the free lunch.
If we’re going to cut deep into spending, then it’s going to hurt. There’s no voodoo powerful enough to get around that.