By Matthew E. Milliken
Nov. 14, 2015
Recently, I performed some sophisticated data crunching on a Tax Foundation analysis of the tax-reform plans of seven Republican presidential candidates. (Which is to say, I typed the data from this Tax Foundation table into a spreadsheet and divided certain numbers by 10.) After comparing the results to historic U.S. budget deficits, I concluded that:
[A]ll of these tax proposals would be budget busters, creating some of the largest annual deficits in U.S. history. If enacted, and if they worked as projected, either government services would have to be cut dramatically or tax rates would have to be increased in order to prevent the national debt from ballooning. And given the political scene, the former option would be far more likely to be enacted.
However, there’s a catch.
The catch is that the Tax Foundation projected potential budget surpluses or deficits for the Republican proposals using two different methods. The numbers I relayed in my previous post were produced using static revenue estimates, a technique that has long been employed by government budget analysts.
But the Tax Foundation favors a different projection method, known as dynamic scoring. (A 15-page defense of this technique is available here; just be aware that not every economist agrees with the reasoning.) The group produced a dynamic revenue estimate for the seven plans in the table.
These numbers differed from the static scoring. Generally speaking, the dynamic revenue estimates were significantly better than the static ones. Let’s take a look at the results, which I present here on a per-annum basis (as opposed to the original Tax Foundation projections, which covered 10-year periods):
Just to review, using dynamic scoring, Trump and Jindal’s plans could produce near-record annual deficits with red ink running to a trillion dollars or more per year over a 10-year period. (Bear in mind that the federal deficit has only broken the $500 billion barrier on five occasions.) Rubio’s annual deficits would exceed $200 billion, which has previously happened — ever — just 20 times in the history of the federal government. The proposals by Bush and Santorum would lead to annual deficits of more than $100 billion, which has happened 29 times out of the past 34 fiscal years. (The only exceptions were seen over the last five budgets approved under
by President Bill Clinton.)
Cruz’s deficits would be a relatively modest $77 billion per annum, and Paul’s budget would — O, miracle of miracles! — average a $74 billion surplus each year for a decade. The first of those would mark only the fifth federal surplus since the 1969 fiscal year, when the the government was $3.2 billion in the green. However, the sum would be smaller than three of the four surpluses generated under Clinton-year budgets.
Allow me to make a point in Paul’s favor. If, as the Tax Foundation projects, his plan generated annual surpluses for a decade, that would be extremely impressive. The U.S. government has only had a single string of five or more consecutive annual surpluses since 1901. (That’s the earliest year in this Federal Reserve Bank of St. Louis data set on federal budget surpluses and deficits.)
That decade of big deficits would be run up by the same Donald Trump, real-estate mogul and reality-TV star, who has been at or near the top of the polls since mid-July. (And by the same Bobby Jindal who is barely registering in surveys.) That 10-year string of relatively modest deficits would come from Ted Cruz, current U.S. senator from Texas, who is running fourth nationally, and Rick Santorum, former U.S. senator from Pennsylvania, who’s drawing the support of less than 1 percent of Republican primary voters. And that decade of surpluses would be the work of the same Rand Paul, U.S. senator from Kentucky, who’s currently averaging 3 percent in national polls.
(By the way, retired pediatric neurosurgeon Ben Carson, who calls for “wholesale tax reform” that will “end the IRS as we know it,” has a page on his official campaign website devoted to his tax proposal. The text runs to the extremely concise length of 124 words, headline included, which is probably why the Tax Foundation has yet to analyze his proposal. Carson is now virtually tied atop the national polls with Trump.)
Yes, yes, yes: Voters make their selections for reasons other than tax policy, and that is an entirely reasonable thing to do. But the disconnect between the professed conservative belief in fiscal responsibility and actual conservative voting preferences as found in polling is pretty staggering.
Let’s return to the Jordan Weissman article that started me on this whole topic. A few weeks ago, after noting that the Tax Foundation projected gross domestic product expansion of at least 10 percent under each of the Republican candidates’ tax-reform plans, Weissman wrote:
A lot of mainstream economists don’t exactly take the Tax Foundation’s growth models seriously, but it goes to show that even with some generous assumptions about what they’d do for the economy, these tax plans still would plunge the country pretty deeply into debt — unless, of course, they’re accompanied by gargantuan budget cuts.
The next time one of your Republican friends claim that their party stands for fiscal responsibility, ask her or him to look at these numbers and point to data in support of their claim.
And if your chum comes up with a good response, please, by all means — let me know.
Author’s note: On March 2, 2016, I edited one paragraph in this post in order to clarify its meaning. Deleted words are indicated by strikethrough text,
like so; added words are indicated by boldface text, like so. MEM