Recently, a spate of Republicans (and a few Democrats) have been complaining about the deficit while simultaneously advocating a budget-busting extension of the Bush tax cuts, which will add more than $800 billion to the deficit once all the debt servicing costs are factored in. Republicans have even created a fantasy world in which tax cuts increase government revenues, in order to justify their two irreconcilable positions.
Last night, Sen. John Thune (R-SD) appeared on CNBC to promote his new “deficit reduction” plan, which creates a new congressional committee tasked with reducing the deficit, only on the spending side, by 10 percent every year. After spending the first portion of the segment griping about the deficit, Thune then turned to tax policy, where he emphasized that, in his view, the Bush tax all need to be extended or we will “imperil our economy’s ability to recover”:
I hope that we can get a vote before the election on extending those tax cuts from 2001 and 2003. If we don’t do that, I think it’s going to really imperil our economy’s ability to recover and our small businesses and investors opportunities to create jobs.
Neither Thune nor CNBC’s Larry Kudlow noted how much such an extension will cost, of course. In fact, Kudlow called Thune’s plan “a roadmap for recovery.” But extending the Bush tax cuts for the wealthy, according to the Congressional Budget office, is the least effective step that Congress could take in terms of boosting the economy with tax or spending policy.
Plus, it’s clear that Thune really doesn’t understand the ramifications of his own deficit plan. After all, he told Fox News’ Greta Van Susteren that reducing the deficit by ten percent a year will lead to the deficit being eliminated in ten years. But as TPM’s Brian Beutler pointed out, “because the deficit would decrease yearly, the actual returns on 10 percent annual savings would diminish over time, such that it would take decades to reduce the deficit to one percent of its current level.” And, technically, the deficit would never be fully eliminated.
In the meantime, Thune’s favored tax policy would blow a hole in the budget, requiring even more draconian spending cuts if his deficit reduction plan were ever put into place. But we shouldn’t be expecting anything more coherent from Thune, considering that he doesn’t grasp how marginal tax rates work and measures economic initiatives in terms of how many times the required money could be wrapped around the Earth.