Last week, Citizens for Tax Justice, a liberal think tank that uses mainstream economic tax modeling, analyzed Marco Rubio’s tax-cut plan. Thirty-four percent of the benefits of the plan would go to the highest-earning one percent of Americans (who, by the way, earn about 21 percent of all income). Rubio’s proposal deliberately provides some benefits to Americans of modest income, which means that its enormous tax cuts for the very rich come alongside some pretty decent-size tax cuts for the rest of us. All told, Rubio’s plan would reduce federal revenue by $11.8 trillion over the next decade. The entire Bush tax cuts cost about $3.4 trillion over a decade, making the Rubio tax cuts more than three times as costly.
How would Rubio’s plan fit into the overall federal budget? One way to consider the scale of this plan is to look at the overall federal budget. Over the next decade, Washington is projected to collect $41.6 trillion in revenue under current policies. Rubio would reduce that to about $30 trillion. Rubio proposes to increase the defense budget — but, for the sake of generosity, let us assume he merely keeps the budget at the current levels he decries as “setting ourselves up for danger.” He likewise promises not to touch benefits for current or near-retirees, leaving those programs unavailable for cuts over that time. According to figures from the Center on Budget and Policy Priorities, expenditures on defense, Medicare, Social Security, and mandatory interest payments on the national debt will total $30.7 trillion over that period — and that’s without accounting for any other functions of the federal government at all. So Medicaid, veterans’ health insurance, transportation, border security, and education, not to mention the entire federal anti-poverty budget other than Medicare and Social Security, would have to go. Oh, and Rubio has also called for an amendment to the Constitution requiring a balanced budget every year.
Oh, one more thing: Among the Republican presidential candidates, Rubio is widely considered to be a moderate on fiscal issues. The clarity with which we can now examine Rubio’s plan, juxtaposed against recent events, provides a sense of the ongoing relationship between the Republican Party and economic reality. It remains deeply hostile.
The Republican Party’s commitment to regressive, debt-financed tax cuts as its central domestic policy goal dates back to the 1970s, when Jack Kemp and William Roth first proposed large-scale income-tax cuts, which became the basis for Ronald Reagan’s 1981 program. At the time, there was at least theoretical justification to cut the top rate, which stood at 70 percent. Subsequent events have not been so kind. The Reagan-era recovery benefited from a bounce-back from a Fed-induced recession that crushed the inflation of the 1970s, but it did not see an increase in the underlying growth rate.
Events since then have looked worse and worse for the anti-tax cause. Bill Clinton raised the top tax rate to 39.6 percent and, confounding unanimous conservative predictions that a recession would ensue, enjoyed an economic boom. George W. Bush cut taxes and, in spite of conservative certainty that faster growth would follow, the economy instead grew tepidly before collapsing in a worldwide meltdown after the housing bubble popped. When Obama opposed extending the portion of those tax cuts that applied to income over $250,000, conservatives insisted it would harm growth. Instead, economic growth has accelerated.
In 2012, Mitt Romney promised that, if elected, by the end of his first term he would bring the unemployment rate down to 6 percent. With 15 months left to go, that unemployment rate now stands at 5 percent. The recovery from 2008 may not be as fast as anybody would like, but it is faster than the recovery in any other country that endured the financial crisis. What factual analysis of these events in any way suggests that a return to regressive, debt-financed tax cutting is the tonic the economy needs?
Romney’s insistence that Obama’s policies have smothered economic growth remains the major premise of the Republican economic strategy. Rubio and the entire GOP field promise not just to enact another huge round of tax cuts, but also to repeal Obama’s regulations on Wall Street and carbon emissions and — of course! — to build the Keystone Pipeline (which credible analyses project to create 10,000 jobs a year, a monthly rounding-error-size amount, for two years, after which 35 jobs a year would remain). But a “credible analysis” — that is, one employed by mainstream economists in either academia or the macroeconomic forecasting profession — is one that almost by definition carries no weight among Republican policymakers. The party’s “mainstream” economic thinking now lies at a point far beyond what used to be considered its fringe. It is a party that has lost all contact with reality, and continues to drift farther and farther over the horizon.