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You Can't Lower Taxes and the Deficit... Dummy!

Posted September 23, 2010

I'll admit that I am not an economist and I know maybe three things about economics. 1. Supply and demand. 2. The law of diminishing returns, which is why the fifth doughnut makes you want to throw up and is nowhere as delicious as the first four. 3. You cannot lower taxes and reduce the deficit.

Throughout the midterm campaign the GOP has claimed that if it wins one or both houses of Congress, Republicans will bring some sort of fiscal restraint to Washington, and that they will both lower taxes and decrease the deficit. Really?

Let's make this personal. Say the federal government is You, Sally Punchclock. And instead of taxes we call it a paycheck. And instead of a deficit we call it "credit card debt." What if I suggested that you took a involuntary pay cut from $25 an hour to $17. Sorry. I had to Simonize my yacht and unlike my yacht's glowing sheen, you, Sally, are replaceable.

At the same time you promise, because it's the New Year and you want to make sure to get out on the right financial footing, you say you will cut your credit card debt. Sorry Sally, you can't reduce your debt. Because you aren't making as much money. Is that not totally fucking obvious? Let me say it again:

Pay cut = harder to pay bills.
Tax cut = cannot pay down deficit.

In a recent interview on NPR Congressman Tom Price (R-GA), suggested it is possible to magically defeat this formula, just as he hopes to emerge innocent from ethics violations related to finance reform.

SCOTT SIMON: Congressman, can you reduce the deficit and cut taxes at the same time?
Mr. PRICE: I think you can, and I think President Kennedy proved it. I think President Reagan proved it.

Way to include a Democrat there!

Because Scott Simon didn't have the heart, time, or interest in being labeled biased to question this notion we'll now look at the facts:

President Reagan increased taxes twice: first in 1982 and again in 1983.

As for deficits? When Reagan left office in January 1989 the budget deficit was $155 billion. But it costs money to do neat things like illegally mine the Nicaraguan harbor at Managua.

As far as I can see, raising both taxes and the deficit is the opposite of lowering both. Even with new math.

What about Kennedy?

President Kennedy cut taxes for those making over $400,000 (in 1960's dollars, which were also called Beatle Bucks), but from a staggering European 91% to 77%. Not quite a "make government small enough to drown it" tax cut. The current top marginal tax rate is 35%, which is why we're kind of broke. [source: Tax Policy Center]

As for the budget deficit: the US ran 2 back to back deficits in 1963-1964. So Kennedy cut taxes, yes, but increased spending, which had been the plan of his evil Keynesian minions all along.

 

 

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