A Budget Narrative for Mitt Romney's America
February 28, 2012 - 4:54pm ET
It seems like just yesterday Mitt Romney released his 59-page "plan for jobs and economic growth." That's because it practically was just yesterday. Romney released "Believe in America: Mitt Romney's Plan for Jobs and Economic Growth," around the beginning of September 2011. It was even available as a free e-book on Amazon.Com. It was, as Richard Eskow put it, "the same old job-killing madness." Implementing it, Bill Scher noted, would require "slashing the social safety net."
That was before Romney retroactively lost the Iowa caucuses to Rick Santorum. That was before Newt Gingrich turned Romney into "The Man From Bain," and surged to victory in South Carolina. That was before Romney found himself running neck-and-neck with a guy he had been leading by 38 points.
That's gotta be enough to drive a guy who's gone from "inevitable" to "in-question" more than a little crazy. In Romney's latest economic agenda, it's starting to show.
Romney's economic agenda circa September 2011 consisted of a refusal to cut corporate taxes or raise taxes on individuals, an increase in defense spending, and a balanced budget amendment that would all but guarantee slashing spending on just about everything but defeat. Faced with a real possibility of losing both his home state and his "inevitability," Republican columnist David Frum writes that Romney "threw his economic plan overboard" in a Detroit speech that "seems to have been written on the back of an envelope."
Mitt Romney is promising that taxes will go down, defense spending will go up, and old-people programs won't change for this generation of retirees. So three of his four options for deficit reduction "taxes, old-people programs, and defense" are now either contributing to the deficit or are off-limits for the next decade.
Romney is also promising that he will pay for his tax cuts, pay for his defense spending, and reduce total federal spending by more than $6 trillion over the next 10 years. But the only big pot of money left to him is poor-people programs. So, by simple process of elimination, poor-people programs will have to be cut dramatically. There's no other way to make those numbers work.
The devil is usually in the details, but Romney's new four-page economic agenda is short on details and heavy on assumptions — short on details about where and how deep Romney would cut, and heavy on assumptions about how much economic growth tax cuts will yield. Is it "voodoo economics" or a wave of the "confidence fairy" dust? Probably a little from column A and a little from column B.
So, there's a lot we don't know. (A lot maybe the Romney campaign doesn't even know.) What we do know is disturbing.
For starter's, Romney's new plan would not only extend the Bush tax cuts, which are set to expire at the end of this year, but would also cut individual income tax rates across-the-board another 20%, reducing the top rate to 28% and the bottom rate to 8%, from 35% and 10%. In addition, Romeny's new proposal would retain the 15% top rate for capital gains and dividends, eliminate taxes on investment income for households making less than $200,000, repeal the estate tax, and drop the corporate tax rate to 25% from 35%.
The tax cuts in the new Romney plan would cost the Treasury $4 to $6.2 trillion in "foregone revenue" over the next decade. That's a stark contrast to President Obama's budget, which would raise around $750 billion in revenue over the next decade, by reducing tax breaks for families making more than $250,000 a year, and individuals making more than $200,000 per year. Romney's campaign says that the new plan would broaden the individual tax base by limiting deductions, exemptions and credits, but offers details.
For all the noise that Romney and the remaining GOP field make about the national debt, Romney's new budget would increase the debt. Last week, the Committee For a Responsible Budget released an analysis of the budget proposals of the four remaining GOP candidates, which concluded that all of them would increase the national debt "by massive amounts." Each would transform the GOP into "The Party of Higher Debts," as James Kwak says.
The CFPB issued its analysis just one day after Romney rolled out his new economic agenda. So, its conclusions applied to the plan Romney introduced in September, which CFPB determined would have little impact. But after Romney rolled out his latest economic agenda, CFPB went back to drawing board, and released an addendum which determined that Romney's plan would increase the debt by $2.6 trillion. The cost of the 20% across-the-board tax cut alone would be about $150 billion by in 2015. Other policies, CFPB estimates, would cost about $50 billion more.
The CFPB does note that the Romney campaign says that there would be "sufficient base broadening to make their plan as a whole ... deficit-neutral." But accomplishing that would require "would require making substantial changes to many tax expenditures, among the largest of which are for mortgage interest, charitable giving, employer provided health care, and state and local taxes."
In other words, Romney achieves "deficit neutrality" through cuts to tax expenditures that hit middle- and working-class Americans hardest. Any benefit these Americans might get from his "across-the-board" tax cut will evaporate the moment tax breaks and expenditures that support these families are sacrificed for the sake of holding the capital gains tax at 15%, eliminating the estate tax, and cutting corporate tax rates.
Even with those offsets, Romney's latest economic agenda would have "no measurable effect on the debt by 2021." Best case scenario: Romney's plan does nothing to reduce the deficit before 2021. Worst case scenario: Romney's plan explodes the debt.
Mitt Romney's latest economic agenda calls for $500 billion in spending cuts by 2012, and caps non-defense spending at 20% of GDP. Keep in mind that this is in addition to reducing revenue by at least $4 trillion or as much as $6.2 trillion. Just days before Romney's Detroit speech, the Center for Budget and Policy Priorities took a look at his earlier budget proposals. Even before Romney threw in the 20% across-the-board tax cut, CBPP determined that Romney's proposals would require massive cuts to non-defense programs. Even without balancing the budget, Romney's agenda would require cutting non-defense programs by $637 billion in 2016 alone, by $6.5 trillion between 2014 and 2021.
There's your "revenue neutral" budget proposal! So what if your 20% across-the-board tax cut reduces revenues by $6.2 trillion? Slash everything but the defense budget by $6.5 trillion and you've achieved something we haven't seen since the Clinton era: a budget surplus, to the tune of $300 billion. By the way, this works even if it turns out those tax cuts don't broaden your tax base. And we haven't even talked about a balanced budget amendment. Throw that in and we're looking at $10 trillion in cuts to non-defense spending by 2021, and a $3.8 trillion surplus. Bonus!
Great. So, how do we get there? And what's "non-defense spending"?
Obliterating the Safety Net
Actually, it's "non-defense discretionary spending" that we're talking about here. It's the "old-people programs" and "poor-people programs" that Ezra mentioned. We're talking about spending on education, transportation, low-income programs, food stamps, disaster relief, veterans, etc. We're talking about programs like Head Start and WIC, the food aid program for women and children. It adds up to about $145 billion for 2012, but that's only about 4% of total federal spending.
It's what we call the "safety net" — a combination of programs designed to keep the poor and "near-poor" from falling into economic oblivion. It's what conservatives like Mitt Romney call an "entitlement society," that's "systematically destroying the work ethic, because they imagine most of it's going to poor people who would rather depend on government than go to work, and to "government bureaucrats" who for some nefarious reason want to keep them "dependent." In fact, 90% of it goes to beneficiaries who are elderly, disabled
True to form, Romney flip flops even here. One minute he's fulminating against and "entitlement society," and the next he's praising the safety net, and using to explain why he's "not concerned about the very poor," because "We have a safety net there." "If it needs repair," he says, "I'll fix it."
Perhaps Romney thinks the safety net is "strong": that it's in pretty good shape. Of course, it's not. It's full of holes and straining under the weight of more 46 million Americans living in poverty, and the millions more rely on the safety net to keep them just this side of poverty. Millions of people are already falling through the safety net, and the recession is pushing millions more into free-fall.
Yes, we have a safety net, but it's starting to unravel and it is in desperate need of repair. Mitt Romney says he'll do that. But even his previous economic agenda would have ripped massive holes in the safety net.
Romney’s budget proposals would shred safety nets even more. According to an analysis by the Center on Budget and Policy Priorities, his plan would throw 10 million low-income people off the benefit rolls for food stamps or cut benefits by thousands of dollars a year, or some combination. “These cuts would primarily affect very low-income families with children, seniors and people with disabilities,” the Center concludes.
At the same time, Romney’s tax plan would boost the incomes of America’s most wealthy citizens, who are already taking home an almost unprecedented share of that nation’s total income. Romney wants to permanently extend George W. Bush’s tax cuts, reduce corporate income tax rates, and eliminate the estate tax. These tax cuts would increase the incomes of people earning more than a million dollars a year by an average of $295,874 annually, according to the nonpartisan Tax Policy Center.
By reducing government revenues, Romney’s tax cuts would squeeze programs for the poor even further. Extending the Bush tax cuts will add $1.2 trillion to the nation’s budget deficit in just two years. That’s the same as the amount that’s supposed to be saved by automatic spending cuts scheduled to start next year – which, by the way, will hit the poor especially hard.
Oh, I almost forgot. Romney and other Republicans also want to repeal of Obama’s health care law, thereby leaving 30 million Americans without health insurance.
A Narrative of Life in Mitt Romney's America
Mitt Romney's newest economic agenda wouldn't just shred the safety net. It would obliterated the safety net. Matt Hubbard, and economic adviser to the Romney campaign, called Mitt Romney's newest economic agenda "a narrative of the policy agenda and life under a Romney presidency." When it comes to middle- and working-class Americans, the poor and the near-poor, Hubbard's words are particularly prescient.
We’re back to numbers there. So let’s try to return to narrative. If Romney cut Medicaid entirely — took it from the $407 billion its projected to cost in 2016 and moved it to zero — his numbers wouldn’t work. If he then excised out all spending on food stamps — taking them from a projected $80 billion in 2016 to nothing — he still wouldn’t be there.
Romney won’t do that, of course. His cuts presumably will be distributed among many, many more programs. But that thought experiment gives you a sense of the size of the cuts he will need to make. And the reality is that he’s not got many painless places to make them. The largest spending program left to him is Medicaid, which provides health care to low-income Americans, children, and the disabled. Retirement costs for federal employees are a large pot of money, but we can’t break all those promises. Transportation infrastructure is expensive, but we will continue to need to repair our roads. And so on.
Yesterday, Bob Borosage wove an alternate narrative of life under a Romney presidency out of nine things Mitt Romney believes, reflected in his new economic agenda. It's a narrative of life in an America where rich no longer have "too little money."
It's a narrative of life in an America where:
- the wealthy no longer have "too little money"
- "those blessed by being born to the wealthy few should inherit the earth"
- the world is "the oyster of corporations seeking tax havens"
- Wall Street is "free to gamble with other people’s money, and you rubes are on your own"
- the military no longer has "too little money," where elderly workers no longer have "too much security and leisure"
- "our schools, water systems, roads and bridges, subways and trains, nutrition programs for children, Coast Guard and FBI" no longer get "too much money" and "do with much less"
- and "children must play the hand that fate dealt them. If they are the heirs to the rich, they live charmed lives. If they are born to the poor, they must rise above it "
But perhaps the best summary I've heard of Romney's budget comes from Republican columnist Frum.
Compassionate conservatism has been dead for a long time. Romney's Detroit speech cremated the remains. As a man, Romney remains far and away the most capable of the presidential candidates seeking the Republican nomination. But he has now finally eliminated the policy differences separating him from the radical congressional wing.
This summer, during the debate over raising the debt ceiling, Republicans used a clip from The Town, a movie staring Ben Affleck, to rally their caucus to support John Boehner's debt plan ... and "hurt some people." In September, New Jersey governor promised wealthy attendees at a Koch-sponsored seminar that "pain will be inflicted" if or when conservatives implement their economic agenda.
So far, the right has been disappointed in their desire to "hurt some people." But if it gets him the votes he needs to win his party's nomination, Mitt Romney is willing to promise them that they will finally get to "hurt some people," if they just get him elected. Mitt Romney is willing to promise conservatives not only that "pain will be inflicted," but how much and upon whom. That pain will be the real narrative of a Romney presidency, at least for 99 percent of us.
This post was corrected to exclude Social Security, Medicare and Medicaid from a list of discretionary spending programs.
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