One of the 270 phrases the “Teen Talk Barbie” once uttered was, “Math class is tough!” Republican presidential candidate and former Massachusetts Gov. Mitt Romney apparently believes every child in America (along with their parents and grandparents) took this to heart back when the talking doll was released in 1992. How else to explain his clear conviction that voters can’t do the basic arithmetic on his fantasy tax and jobs plans?
That’s the only conclusion I can draw from the fact that in a live, nationally televised debate, Gov. Romney told the American people that “My number one principle is there will be no tax cut that adds to the deficit,” and “I will create—help create 12 million new jobs in this country with rising incomes.”
This is nonsense. The Economic Policy Institute recently completed some new analysis to include Gov. Romney’s claim from the first presidential debate that he will lower the rate but not add to the deficit. Gov. Romney should read their report. They find that if he follows his own plan and implements his own revenue-neutral criteria, the economy will shed about 1.1 million jobs in 2013 and lose nearly an additional 1.8 million in 2014.
This bears repeating: Not add 1.1 million jobs next year, but lose 1.1 million. That would be a whopping 2.9 million fewer jobs that we’ve had in the past 12 months.
So let’s walk through the math. First, Gov. Romney clearly articulated that his economic plan would be to “make permanent, across-the-board 20 percent cut in marginal rates” but that this will not add to the deficit. It will be what economists call “revenue neutral.”
This leads us to our first math problem: How can we lower the tax rate, but have it be revenue neutral? Answer: by raising taxes. If the marginal tax rate is lowered by 20 percent, but this is revenue neutral, then taxes must rise somewhere by enough to cover that 20 percent tax cut. That’s just math.
Now, the trick is that Gov. Romney hasn’t told us where he would raise taxes, but he’s been heard all across America telling people that the tax increase won’t fall on them. The reality is that either someone’s taxes will go up or the federal budget deficit will indeed rise.
Let’s recall where we’ve heard this story before. President Ronald Reagan told us that if we lowered the rate of taxation, the resulting economic growth would be so fast that the revenues would increase sufficiently to make up for the lower rate. As Gregory Mankiw, chair of the Council of Economic Advisers under President George W. Bush, wrote in his textbook Principles of Macroeconomics, this was a classic example of “fad economics,” concluding, “when politicians rely on the advice of charlatans and cranks, they rarely get the desirable results they anticipate.”
Mankiw and his textbook are right. “After the 1980 presidential election, Congress passed the cut in tax rates that President Reagan advocated, but the tax cut did not cause tax revenues to rise.” Tax revenue fell and this resulted in the “largest peacetime increase in the government debt in U.S. history.” Ironically, Teen Talk Barbie was released after Reaganomics nearly tripled U.S. debt (in nominal dollars), so maybe her manufacturer, Mattel, Inc., was concerned that little girls weren’t taking enough math.
But let’s turn to the second math problem. Gov. Romney claims he will create 12 million jobs, 7 million of which will be generated by his revenue-neutral tax cuts. So how can we create 7 million jobs through revenue-neutral tax changes? Answer: We can’t.
In a white paper outlining his economic platform, “Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth,” Gov. Romney offers a 59-point plan to create jobs and lower unemployment. The Center for American Progress Action Fund went through this 59-point plan and, by a conservative tally, found that the plan would actually cost the economy about 360,000 jobs in 2013 alone.
Now, that’s pretty bad. But the story may be far worse. The Economic Policy Institute’s new analysis of Gov. Romney’s claims sees the economy shedding about 1.1 million jobs in 2013 and even more in 2014. This compares to the economy creating 1.8 million jobs in the past year under President Obama.
President Bush also claimed he could grow the economy if Americans would agree to slashing taxes on the rich. In 2001 Glenn Hubbard, chairman of President Bush’s Council of Economic Advisers, predicted that tax cuts for the richest Americans would “quickly deliver a boost to move the economy back toward its long-run growth path.”
Now, it’s also just math to look at what happened after the Bush tax cuts. Our economy experienced its worst record for growth in investment, employment, and incomes in half a century—devastating our middle class.
All of this math speaks for itself, but not so for “Teen Talk Barbie.” Mattel was forced to recall the math-adverse Barbie, and rumors are that only a few remain. Hopefully, Gov. Romney’s bet that Americans took her seriously will be wrong.
Heather Boushey is a Senior Economist at the Center for American Progress Action Fund.