Republican Hopefuls Rely on Faith in Economics Too

Agenda-Setting Financial Insight.
March 7 2012 2:17 PM

Republican Hopefuls Rely on Faith in Economics Too

How much faith should we have inRomtorumgrich's plan for cutting taxes and reducing the deficit?

Photo by Ethan Miller/Getty Images

The Republican Party’s U.S. presidential hopefuls are relying on faith for more than just the religious vote - it’s key to their economic plans. Romtorumgrich are promising to cut taxes and simultaneously shrink the deficit. Economists criticize their math, which doesn’t add up. The candidates say critics don’t use “dynamic scoring” to account for the stronger growth that would result from lower taxes. Neither should voters. 

Rick Santorum and Newt Gingrich, runners up to Mitt Romney after the Super Tuesday primaries, want deep tax cuts and a balanced budget. Yet the nonpartisan Committee for a Responsible Federal Budget says the deficit would swell under either’s vision. Its intermediate budget-cutting scenario shows Santorum’s and Gingrich’s plans would inflate the deficit by $4.5 trillion and $7 trillion, respectively, over nine years. 

Romney’s proposals don’t do much better. His income tax cuts and Alternative Minimum Tax repeal would boost the deficit by $3 trillion over a decade, according to the nonpartisan Tax Policy Center. Pile on reductions to capital gains, estate and corporate taxes and the number balloons to Gingrichian levels. 

The candidates dispute these independent estimates, saying they only consider a static scenario where growth remains constant with or without their tax cuts. The three instead rely on what is known as dynamic scoring, which considers the impact fiscal policy changes would have on economic behavior. Their models assume reduced tax rates will pump up overall growth and, with it, government tax receipts. 

While that may be the case, the trillion-dollar question centers on magnitude. There is no economic consensus on the precise impact tax cuts have on growth, which is why most economists agree that dynamic scoring won’t pump up tax revenue the way the candidates hope. Romney economic adviser Greg Mankiw himself published a 2005 study that showed tax cuts don’t pay for themselves dollar for dollar. 

For argument’s sake, though, take the rosy assumption that Santorum’s tax cuts could pay for half their cost. He would still need to shave $3 trillion in spending over nine years to achieve a balanced budget.* The chances of that happening are remote, as the failure of Congress last year to agree on $1.2 trillion in cuts during the debt ceiling debate shows. But then again, with a little faith anything is possible - at least that’s what the three GOP candidates seem to want voters to believe.

Read more at Read more at Reuters Breakingviews.


*Correction, March 8, 2012: This piece originally stated that Santorum would need to cut $3 billion in spending over nine years to attain a balanced budget. He would need to cut $3 trillion.

Daniel Indiviglio is a Reuters Breakingviews columnist, based in Washington, where he covers the intersection of politics and business. He joined from The Atlantic, where he provided analysis on topics such as financial regulation, housing finance policy, the Treasury, and the Fed.


Justice Ginsburg’s Crucial Dissent in the Texas Voter ID Case

The Jarring Experience of Watching White Americans Speak Frankly About Race

How Facebook’s New Feature Could Come in Handy During a Disaster

The Most Ingenious Teaching Device Ever Invented

Sprawl, Decadence, and Environmental Ruin in Nevada

View From Chicago

You Should Be Able to Sell Your Kidney

Or at least trade it for something.

Space: The Next Generation

An All-Female Mission to Mars

As a NASA guinea pig, I verified that women would be cheaper to launch than men.

Terrorism, Immigration, and Ebola Are Combining Into a Supercluster of Anxiety

The Legal Loophole That Allows Microsoft to Seize Assets and Shut Down Companies

  News & Politics
Oct. 19 2014 1:05 PM Dawn Patrol Justice Ruth Bader Ginsburg’s critically important 5 a.m. wake-up call on voting rights.
Business Insider
Oct. 19 2014 11:40 AM Pot-Infused Halloween Candy Is a Worry in Colorado
Oct. 17 2014 5:26 PM Judge Begrudgingly Strikes Down Wyoming’s Gay Marriage Ban
  Double X
The XX Factor
Oct. 17 2014 4:23 PM A Former FBI Agent On Why It’s So Hard to Prosecute Gamergate Trolls
  Slate Plus
Slate Picks
Oct. 17 2014 1:33 PM What Happened at Slate This Week?  Senior editor David Haglund shares what intrigued him at the magazine. 
Oct. 19 2014 4:33 PM Building Family Relationships in and out of Juvenile Detention Centers
Future Tense
Oct. 17 2014 6:05 PM There Is No Better Use For Drones Than Star Wars Reenactments
  Health & Science
Space: The Next Generation
Oct. 19 2014 11:45 PM An All-Female Mission to Mars As a NASA guinea pig, I verified that women would be cheaper to launch than men.
Sports Nut
Oct. 16 2014 2:03 PM Oh What a Relief It Is How the rise of the bullpen has changed baseball.