USA TODAY International Edition
Trump, Bush peddle more tax cut snake oil
One of the oldest tricks in the politician’s playbook is to promise big tax cuts, and when critics howl about how the lost revenue will balloon the deficit, insist there will be large but unspecified spending cuts or, even better, fantastic economic growth that will help the cuts pay for themselves.
Ronald Reagan used this tactic to pass big “supply side” tax cuts in 1981, and George W. Bush updated it to pass another big round of cuts in 2001. In both cases, the result was the same: bigger deficits and more debt.
So no wonder the tax plans Jeb Bush and Donald Trump unveiled this month sound familiar. Leave aside the details about whose taxes would get cut by how much. Both proposals amount to enormous drains on the federal Treasury.
Bush’s plan is less irresponsible than Trump’s, but both would make responsible budgeting impossible over the next decade without massive cuts in big- ticket government spending programs, from defense to Social Security. Or more borrowing that would spike deficits and balloon the national debt, which already exceeds $ 18 trillion. Funny, but we don’t hear either candidate for the 2016 Republican presidential nomination talking about that.
Instead, we’ve heard both promise their plans will unleash spectacular economic growth that could offset some or all of the lost revenue. Call this the magic asterisk. Bush says his proposal will spur steady 4% annual growth, about double the current rate. The non- partisan Tax Foundation puts the revenue loss from Bush’s tax cuts at $ 3.6 trillion over the next 10 years, but at $ 1.6 trillion when factoring in the positive effects from a booming economy — a dubious technique called “dynamic scoring.”
Because Trump claims to do everything bigger and better than his rivals, he’s insisting his plan will create growth of 5% or even 6%. “This will be like a rocket ship for the economy,” Trump boasted to NBC’s Matt Lauer. The Tax Foundation calculated Tuesday that Trump’s plan would increase the deficit by more than $ 10 trillion over 10 years, even with dynamic scoring.
Let’s label this what it is: snake oil. The economy is stuck in frustratingly low growth, and the kind of acceleration Bush and Trump promise would be terrific if it happened. But too many tax cuts, like too much beer, can be a problem — something that ardent tax cutters never seem to grasp.
Supply- siders advocated big state tax cuts in Louisiana and Kansas, for example, promising explosive growth. Instead, job growth in both states has lagged the national average, and the lost revenue blew big holes in the states’ budgets, leading to destructive cuts in education and other vital programs.
An analysis last year by the non- partisan Congressional Research Service found “little relationship” between tax rates and economic growth. The analysis said claims that economic growth significantly reduces revenue lost to tax cuts “do not appear to be justified by the evidence.”
We wish Bush and Trump would read the report, but we’re not optimistic that it would change their minds.
This seems to be a lesson that politicians and the nation are doomed to learn over and over again.