Our guest bloggers are Michael Linden, the Director of Tax and Budget Policy at the Center for American Progress Action Fund, and Seth Hanlon, the Director of Fiscal Reform at the Center for American Progress Action Fund.
Mitt Romney’s latest tax plan would reduce federal revenues by more than $6 trillion over the ten year period from 2013-2022, and that’s on top of the more than $4.5 trillion cost of extending all the Bush tax cuts. But Romney insists that his tax plan will not add to the deficit. He claims that a mixture of “stronger economic growth” and “base broadening” will make up for the lost revenue.
So, just how strong would economic growth have to be to make his plan add up?
The economy would need to grow at a real rate of 6.8 percent every year for the next five years! In other words, without additional measures to raise revenue, the only way Romney’s tax plan will raise the same amount of revenue by 2017 as the current tax code would, is by having the economy go on an unprecedented tear like nothing this country seen in generations. 6.8 percent real growth for five straight years is “implausible,” to say the least.
To put that in perspective, the Congressional Budget Office currently projects that the economy will grow by an average of 3.3 percent annually over the next five years. The very best five year period in American post-war history was from 1961 to 1966 when economic growth averaged 5.8 percent. Former Romney opponent and now Romney-backer Tim Pawlenty’s economic plan relied on consistent 5 percent real growth and he was basically laughed out of the room for making such outlandish assumptions.
Of course, Mitt Romney has also promised to “broaden the base” by eliminating or limiting some tax breaks for the wealthy, while leaving those for the middle intact – though he has yet to identify even a single specific one.
But even if we take Romney at his word, the math still doesn’t work without enormous and unrealistic economic growth. Limiting the value of tax expenditures for those making more than $250,000 would generate between $40 and $50 billion in 2017. Romney would still need five years of 6.5 percent real growth to make up the rest. Even completely eliminating all of the major tax benefits for those in the top 1 percent except for the special rates on investment income – which would generate around $150 billion – would still leave Romney relying on five years of 5.8 percent real annual growth. In fact, anything under $275 billion in base broadening for 2017 would require 5 percent real growth or better to make the numbers add up to the same level of revenue as current policies would generate.
“Offering gimmicky proposals that rely on implausible levels of economic growth and blow huge holes in the budget is easy,” Romney said. He might have continued with, “Now let me show you how easy.”
According to his own standards on the campaign trail today, Mitt Romney was once a “radical” on energy issues.
In 2003, as governor of Massachusetts, he supported “investing in cleaning technologies” for an old coal plant in the commonwealth responsible for dozens of deaths, saying “I will not create jobs … that kill people.”
Also that year, Romney set up a $15 million green energy trust fund for renewable energy in order to create a “major economic springboard for the commonwealth.”
And in 2005, before deciding to pull out of the Regional Greenhouse Gas Initiative, Romney called cap and trade “good business.” That was back when the Economist magazine named him a “climate friendly” Republican.
Today, Romney says “we don’t know what’s causing climate change on this planet,” explaining that his new energy policy is to “aggressively develop our oil, our gas, our coal.”
Romney’s changing positions on a broad range of issues have left supporters wondering where he’ll actually land on the issues if he becomes president. As Politico reported yesterday, some donors in the environmental community are putting their bets on another flip flop on climate and energy issues:
Julian Robertson, founder of the Tiger Management hedge fund, helped put cap-and-trade legislation on the map with $60 million in contributions over the past decade to the Environmental Defense Fund.
Now, Robertson has given $1.25 million to Romney’s Restore our Future super PAC, plus the maximum $2,500 to the Romney campaign.
Other green-minded financial backers may not be giving as much as Robertson, but they still share the view that climate-change science and a solid environmental agenda wouldn’t be a lost cause if Romney won the White House.
“My feeling is that on these issues that people learn,” said former Gov. Thomas Kean (R-N.J.), who maxed out last fall to Romney with a $2,500 check. “And my hope is, as time goes on, he will understand that not everybody agrees on how you deal with these issues, but I hope he will agree with 99 percent of the scientists who believe this is an issue that we have to deal with.”
This sentiment echoes what other observers have predicted. For example, Andrew Light, an international climate expert with the Center for American Progress, said he doesn’t think a Republican president would put an end to American involvement in climate negotiations. Because they are now a “central driver of broader foreign policy,” it would be tough for a candidate like Romney to pull out.
“I am certain that there would be members of the administration who are not isolationists on foreign policy,” said Light.
Although some experts believe Romney’s climate stance on the campaign trail might differ from his actual policies, signs don’t point to dramatic change. Last week, Romney chose oil billionaire Harold Hamm to chair his energy advisory panel — joining a group of lobbyists who have worked for the coal and tar sands industries.