On the Squawk Box yesterday, CNBC’s personalities argued over the value of government spending versus tax cuts in an economic downturn. CNBC personality Rick Santelli bemoaned federal economic aid as a “hard-headed” policy in which “paying firemen and teachers across the country” does nothing for the “unemployment situation.” Contributor Steve Liesman rebutted, asking Santelli, “Unaffected how? Unaffected by being much higher if more teachers and policemen were laid off?” Liesman also challenged the familiar conservative tax refrain, stating, “In general, I would say the rule is this, is that lower taxes generally do not pay for themselves.”
Liesman’s points threw Santelli into a mental breakdown. When prompted on whether tax cuts would truly help address the deficit, he and fellow right-wing economist Jeff Nielson launched into a childish tirade against government spending and the capital gains tax:
LIESMAN: Let me get this straight, all you guys wanna cut taxes en route to bringing down the deficit,
SANTELLI: No I didn’t say anything about taxes Steve. I want the government to stop spending! Stop spending! Stop spending! Stop spending! Stop spending! That’s what we want! Stop spending!
NIELSON: And cut capital gains spending! Cut capital gains. Cut capital..make it zero percent and see what happens. [...]
LIESMAN: You know, you know I just — I just keep saying what the data show and the data show that the tax cuts don’t pay for themselves. By the way –
SANTELLI: Oh you wouldn’t know data if it bit you on the nose.
SANTELLI: Go read some Austrian economist instead of the funny pages!
Liesman tried one more time to question how “we are going to cut taxes and deficit spending at the same time.” Santelli yelled, “Go back to Russia where you understand the state and the citizen” and walked off the set.
Santelli and Nielson are wrong on their stance on federal spending and taxes. As Nobel-prize winning economist Paul Krugman recently noted, “[P]enny-pinching at a time like this isn’t just cruel; it endangers the nation’s future” and “doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues.”
Parroting Newt Gingrich’s calls for lowering the capital gains tax and other tax breaks for the rich is not much wiser. After the 2003 capital gains tax cut, growth in non-residential investment “only matched the historical norm.” Instead, this cut would overwhelmingly benefit the wealthiest taxpayers.
Santelli has made a habit of railing against federal aid for economic recovery. In 2009, Santelli famously called for a Chicago Tea Party to protest President Obama’s housing rescue plan to help Americans “refinance their homes or avert foreclosures.”