Through the course of the average day during this politically charged season (and, as you know, we are in the midst of a permanent campaign, no end in sight), you are likely to hear all kinds of wild economic claims and predictions. Among the most impressive, in my humble opinion, is Gingrich’s $2.50-a-gallon gas promise. We expect no less from the once and future King of the Moon People. A big idea man. The thing about big ideas is that they can also be bad ideas. In the case of the $2.50 gas, though, we’re talking more about excessive blowhardism and the usual type of empty pandering you see from seasoned politicians like Gingrich. Last presidential election, it was drill, baby, drill! This time, it’s pappy cheap-gas. Also, pappy tax cut, as always – that one never gets old.
This is where the faulty economic theory part comes in. Take pretty much any one of the Republican candidates’ tax plans, to the extent that they’ve been articulated thus far. Romney, for instance, is touting a 20% across-the-board tax cut. What he’s actually talking about is raising taxes on the bottom third of wage earners, which the G.O.P. field has for several months been describing as woefully undertaxed. Meanwhile, at the top end, the richest of the rich (i.e. the parents of kids too rich to want to hang around with Richy Rich), folks will be seeing an extra $400K or so in their yearly income. All well and good, right? These are the “job creators”, right? The folks who fired your ass so they could afford a second Bentley. They were the ones paying too much, as George W. Bush lamented back in 2000 (which he later fixed with his massive tax cuts).
All right, except that at the same time they argue for a balanced budget, fiscal discipline, etc. – a trope that has grown more insistent by half since the White House changed hands in 2009. Bush’s tax cuts blew a hole in the federal budget you could drive the Nimitz through; in fact, they planned for it to expire after a decade and put a lot of the cost in the out years so as to bring down the impact. But they – meaning Bush, Cheney, budget director Mitch Daniels, and others – certainly knew that the sunset provision would be meaningless, simply because of the politics of “raising” taxes (e.g. letting cuts expire). Romney’s plan would add to that deficit in spades, prompting massive cuts in social services, infrastructure spending, aid to states, you name it. That would put us in a Greece-like downward spiral – cuts that lead to economic contraction, which negatively affects tax revenues, opening a wider budget gap, which brings on more cuts, etc. Rinse and repeat.
The best they can offer is a race to the bottom. That’s why we have to push back. If they gain control of the budget process again, Greece is the word, my friends.
luv u,
jp
