House Republicans released their budget today, and I found it to be…um…how can I put this nicely?…orthogonal to reality. As I wrote earlier:
The policies put forth in this document suggest that America’s main problem is that the poor have too much and the wealthy, too little. The budget plan “corrects” this perceived imbalance by deeply cutting programs that help low- and middle-income people, and cutting taxes on those with high incomes, capital gains, multinational corporations and “pass through” business income.
Programs that provide affordable health coverage for the middle class (Obamacare, which they repeal) and the poor (Medicaid, which is “block granted”) face large spending cuts. Future elderly persons do not escape unscathed, either, as Medicare is “voucherized” beginning in 2024. The budget includes more than $1 trillion in unspecified cuts that would appear to fall on nutritional support for the poor and tax credits for low-income, working families.
While the budget’s authors claim it balances out revenues and spending within the ten year budget window, to get there it uses the same massive magic asterisk as did the Ryan budgets upon which this one is based. They write down revenue targets and, in Ryan’s case, profess to have ways to get there. In this case, however, they simply invoke “faith.”
When a reporter asked Budget Committee chair Tom Price how his budget makes up the lost revenue from all the tax cut implicit in their budget, he replied, “We believe in the American people and we believe in growth.”
He goes on to invoke supply-side fairy dust on how tax cuts would create more growth and thus more revenues, but they’ve got an interesting problem here. They got the CBO to score their budget, and the budget office did, in fact, say it would raise GDP per person (really GNP, but no matter…this is all just fun with numbers) by 1.5% by 2025.
But you’ve got to appreciate the pretzel logic here. You only get the boost in growth because CBO must do what you tell them. If you say, as Price and co. did, that you’ll cut taxes by trillions and yet somehow (I guess because of your belief in the American people and growth) balance the budget, then and only then do you get CBO to credit you with lower deficits, lower debt, lower interest rates, more growth and thus higher per capita income.
But if your plan fails because no matter how much you believe in the American people and growth, tax cuts of the magnitude you’re contemplating sharply increase deficits and debt, even with all your spending cuts, then you don’t get the lower interest rates, growth, etc.
I too believe in the American people and growth but I don’t believe in magic asterisks or tax cuts that pay for themselves. It’s great to have faith, but math is good too.