October 4th, 2012
A follow-up to Backtracking on Taxes and The Bucket/List, inspired by the campaign’s increasing resort to dynamic scoring to shore up Mitt’s tax cut plan. (If you’re not interested in my satirical poem, please skip it and read the more detailed analysis below.)
“You cut taxes, and the tax revenues increase.” – George Bush “Stronger economic growth and reductions in spending will help to ensure that these tax cuts do not expand deficits. In addition, higher-income Americans in particular will see limits placed on deductions, exemptions, and credits that are currently available. The result will be a pro-growth tax code that still raises the necessary revenue, retains the existing progressivity, and ensures that middle-income Americans see real tax relief.” – Romney campaign website “How will we generate sufficient revenue to balance our budget without discouraging economic activity, and will the burden of taxation fall equitably on all Americans?” — Romney tax policy brochure “I will not add to the deficit with my tax plan.” – Mitt Romney at last night’s debate
Once again, fans adoring
Line up behind dynamic scoring.
Mitt wasn’t emphasizing it much before,
But is now discussing it more and more.
He claims reducing tax rates will be an economic super-charger,
But it didn’t work for George, and his tax cuts were much larger.
That simple comparison shows why
Mitt’s dynamic scoring dodge is a lie.
Mitt’s tax plan is an ever-shifting playing field. He has emphasized that his plan would be made revenue neutral by closing loopholes, at least tacitly tapping into the right-wing canard that all the economic growth that those lower rates would generate would magically result in increased revenue. Now, as Mitt’s math has increasingly come under attack, Romney has rhetorically switched to include that magical new revenue into his revenue-neutral baseline. When Mitt says “I will not add to the deficit with my tax plan,” what he’s really saying is that he’s giving up on the idea that his tax cut will reduce the deficit, and isn’t even asserting that anymore. In other words, he’s turning his gravy into the main course. How can Romney’s plan cut the deficit if it’s revenue-neutral, even after including all the economic growth it will supposedly generate into that revenue neutrality?
Wherever you put the imaginary proceeds, accounting for this magically generated economic growth is called “dynamic scoring,” and it’s an age-old GOP tactic (for the GOP’s new, fiscally-irresponsible age, that is) to justify tax cuts and increased deficit spending (but only when Repubs are in power and for things they want to spend money on, of course). It’s free money! Everybody wins!
Dynamic scoring is true in theory, to an extent, but the impact on growth is proportionate to the pre- and post-reform tax efficiency gap, and the size of the tax cut. For example, a two-thirds cut in a top 99% marginal tax rate that drives investment to economically unproductive tax shelters will have far greater impact than, say, reducing a 30% tax rate to 24%. That distinction is inherent in the Laffer Curve itself: at some point, you hit the other side of the curve, and further tax cuts revenues result in decreased revenues. Maintaining the contrary, as many Republicans do, is like claiming that since liposuction reduced your weight from 200 to 150 pounds, doing it again will automatically reduce your weight another 50 pounds.
In addition to the change in rates, the size of the net tax cut is also a factor. A massive tax cut will indeed have a stimulative impact, just as infrastructure spending does, though most economists agree that the latter has much greater bang for the buck. That impact is completely Keynesian, so it’s ironic that the dynamic scorers simultaneously adopt Keynes’ views and curse his name.
But here’s the kicker: even if dynamic scoring had worked for Repubs in the past (it sure didn’t work for GB2), will Mitt’s plan benefit from it? After all, it’s a revenue-neutral tax rate reduction of a mere 20%, unless Repubs can’t find enough loopholes to close and have to reduce the rate reduction further to 5% or 10%. If the much larger GB2 cuts weren’t “dynamic” enough to generate all the magical economic growth Republicans promised back then, why would Mitt’s smaller and maybe-we’ll-make-them-maybe-we-wont cuts work now?
So sorry Mitt, but your recourse to dynamic scoring would more appropriately be called…
For more information on dynamic scoring, read Media Myth That Cutting Taxes Boosts Revenue Revived For 2012 (Media Matters for America 1/26/12), The GOP’s ‘Dynamic’ Deception on Debt and Tax Cuts (Daily Kos 2/29/12), and this excellent piece on the conservative media’s misguided attempt to revive Laffer, Now that’s some dynamic scoring (Economist.com, 8/09/12).
Tags: 2012 election, Bush, Clever titles, Debates, Debt, Deficit, Economics, Economy, Elections, Funny pictures, hypocrisy, Mitt's plan, Republicans, Romney lies, Taxes, Wonkery
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