Mitt Romney’s wrong: You can balance the budget through taxes. But you may not want t

Crabtownboy · Aug 9, 2012

To give another data point .................

“Mathematically there are three ways of balancing a budget,” Mitt Romney told Bloomberg Business Week. “One is by cutting spending; one is by growing the economy; and the last is by raising taxes.” So far, so good. But Romney went on to say this:

The challenge of raising taxes is that it depresses growth. And so like a dog chasing its tail, you can’t get to a balanced budget by simply raising taxes. As a matter of fact, it is ultimately counterproductive.

What Mitt Romney is suggesting here is that taxes have such a large and negative effect on growth that raising them does not lead to net new revenues, or at least not enough net new revenues that you can support federal spending in the 22 percent of GDP range. This is a convenient argument for Romney as it gives him a reason, beyond simple conservative dogma, to oppose any and all tax increases. But it’s not true. You can get from where we are to a balanced budget by raising taxes. You may not want to. But you can.

We know this from both international experience, historical experience, and economic modeling. Economist Bruce Bartlett, author of one of the best books on tax reform, notes that ”there are many countries with tax/GDP ratios well above our current or projected spending/GDP ratio. In other words, it could be done if we were willing to adopt European-style tax systems.” Len Burman, an economist at Syracuse university, makes a similar point. “Our taxes are at about 28 percent of GDP. In Denmark, the [tax burden] is closer to 48 percent. Their GDP per capita is about the same as ours.”

Joel Prakken, an economist at Macroeconomic Advisers, points out that “we had very nearly balanced budgets back in the 1960s through the mid-1970s when top marginal tax rates were much higher than they are now.”
Indeed, the average budget deficit from 1950 to 1980 was 1.17 percent of GDP. The average budget deficit under Ronald Reagan and George W. Bush — so, under the major tax-cutting presidents — was 3.1 percent of GDP. The average budget deficit under Bill Clinton was 0.7 percent of GDP. So, yes, tax cuts lead to deficits and tax increases close them.

http://www.washingtonpost.com/blogs...budget-through-taxes-but-you-may-not-want-to/
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carpro · Aug 10, 2012

Romney is 100% correct.

No matter how much taxes are raised, it's never enough.

Politicians will spend evey penny, and then some. So the money vanishes and the economy is damaged. It's a lose lose proposition.

Spending cuts, policies that promote business growth and a modest across the board tax increase will do the job.

After all, your hero the zero say everyone should have some some "skin in the game" but he's only trying to skin 1%.

He lied, as always. He's great at coming up with those types of statements, but he never delivers.

LadyEagle · Aug 10, 2012

:thumbs: :thumbs: :thumbs:

Arbo · Aug 10, 2012

Second that :thumbs::thumbs::thumbs:.

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