Our guest blogger is Michael Linden, Director of Tax and Budget Policy at the Center for American Progress Action Fund.
This past week, former Minnesota Governor and 2012 GOP presidential hopeful Tim Pawlenty gave a speech outlining his economic “plan.” The speech has been widely, and rightly, panned as radical, unrealistic, and completely out of touch. But few have mentioned that, if Pawlenty had his way, his plan would be unconstitutional as well. That’s right, unconstitutional.
In his speech, Pawlenty called for an amendment to the US constitution to require a balanced budget. But he then went on to propose spending and tax policies that would result in massive deficits and exploding debt. In fact, Pawlenty’s plan would result in average deficits that are more than twice as large as the ones we’d have under President Obama’s fiscal framework.
By 2021, under Pawlenty’s plan, total publicly held debt would exceed 100 percent of GDP — over $24 trillion. That’s more than 20 points higher than under the president’s proposed framework (see below for how we calculated deficits and debt under Pawlenty’s plan).
Of course, that’s what happens when you propose to cut taxes on millionaires by nearly half, and cut taxes for the richest 400 households in the country by 73 percent. Pawlenty’s plan tax plan would cost about three times as much as the extending all of the Bush tax cuts, which he also proposes to do.
The overall effect would be to drive revenue down to levels the country hasn’t seen in more than 70 years. Revenue levels would be so low that even with the incredibly draconian cuts implied by Pawlenty’s simplistic and unworkable 18 percent cap on federal spending, deficits would still be huge.
With budget busting policies like these, it’s no wonder than Pawlenty had to resort to fairy tales about how tax cuts pay for themselves. Otherwise, he’d have to admit that, far from balancing the budget, his plan would make matters much worse.
To determine the deficit and debt levels that would result from Pawlenty’s plan, we used the Tax Policy Center’s estimates the revenue effect of his tax proposals. Their estimate is nearly identical to our original estimate. For spending, we relied on two parts of his speech. First, Pawlenty said he supported a cap on spending at 18 percent of GDP. To predict the path that federal spending would take from its current levels to 18 percent, we incorporated his contention that, “cutting just 1% of overall federal spending for 6 consecutive years” would achieve that goal. Net interest on the debt was then calculated using the implied average interest rate in the most recent Congressional Budget Office projections. All other economic assumptions are also the same as those used by the Congressional Budget Office in their latest projections.