Sunday, September 02, 2012

The Wall Street Journal editorialists rush in where Romney fears to tread

The true believers in supply-side economics on the Wall Street Journal editorial board long for a policy debate that Romney is determined to avoid:
the one thing [Romney's speech] didn't do constitutes a major political gamble. Neither he nor the entire GOP convention made a case for his economic policy agenda. He and Paul Ryan promised to help the middle class, but they never explained other than in passing how they would do it.

In his acceptance speech, Mr. Romney tossed out his five policy ideas almost as an afterthought. Energy got one sentence, education scored big with two. Neil Armstrong received almost as much speech time as what Mr. Romney would do specifically to spur faster growth and raise middle-class incomes.

That is doubtless because Romney only adopted his current economic proposals -- large marginal tax rate cuts that would either blow a huge new hole in the budget or necessitate tax loophole closures that would hit the middle class, coupled with enormous cuts in domestic spending programs -- because they were a prerequisite for winning the Republican nomination. His ability to defend the overall architecture -- marginal rate cuts and huge domestic spending cuts -- has been further undermined by his recent promise to erase the Medicare savings in the ACA and forswear the annual spending growth caps in Ryan's Medicare plan. His budget math is now insane -- a ten year $10 trillion revenue hole ($5 trillion in new tax cuts on top of Bush's) to be offset by unspecified tax loophole closures and spending cuts while growing defense spending and relying exclusively on the competition fairy to control Medicare spending.

The Journal editorialists understand perfectly well what Romney is up against in defending this roadmap:
Democrats will tear into Paul Ryan's House budget and Mr. Romney's tax plan. They'll say he wants to favor his rich friends and political donors, that he'll loot the middle class and brutalize the poor with spending cuts on everything from disaster relief (see Louisiana) to Pell grants to food stamps.

Meanwhile, Mr. Obama will explain in glorious detail all of the "investments" he wants to make in schools, roads, college tuition, medical research, electric cars—which Mr. Romney's "savage" cuts would take away.
Underpinning that attack is the basic math laid bare by the Tax Policy Center in its analysis of Romney's tax reform plan. TPC demonstrated that Romney can't a) cut marginal rates 20%, b) leave taxes on personal investment untouched, and c) offset the revenue loss by closing tax loopholes (making the plan 'revenue neutral') without effectively raising taxes on 95% of Americans -- which Romney has promised not to do. The rate cuts are worth far more to the wealthy than the loopholes (because their overall taxable income is so huge), while the loopholes are worth more to the nonwealthy than the rate cuts.  Romney, understanding that TPC's analysis is incontrovertible, simply dismissed the report as "garbage" without offering any substantive rebuttal.  The Journal crew, in contrast, wants him to layer on fresh obfuscations:
...was it too much to devote a single paragraph to pre-empting the attacks on Mr. Romney's tax reform?

Something like this: "President Obama will say I want to cut taxes on the rich. But a fairer tax code with lower rates for everyone will lead to more investment, faster growth and more middle-class jobs. I want to eliminate the special tax favors that the rich can exploit because they have political power that average Americans don't. Mr. Obama wants to keep the current tax code because it gives the rich and powerful in Washington more power. I want average Americans to have more money and power instead."
This retort could only mean: I will reduce the power of the rich and powerful by cutting their access to tax loopholes worth a fraction of the massive windfall they will gain by a 20% rate cut. I will give more money and power to average Americans by giving them a marginal rate cut worth a fraction of the additional tax liability they will be subjected to by my closing or reducing said loopholes.

Unlike Romney, the Journal editorialists tried last month to rebut the TPC conclusions in detail, which they managed only by misrepresenting TPC's assumptions and assuming magical growth rates spurred by the marginal rate cuts..  Romney knows better than to show the ball like that.

Mitt Romney, taxer of muni bonds?

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