REPUBLICAN ECONOMICS JUST DOESN'T ADD UP AND IT NEVER HAS
THE CAMPAIGN OF MAGICAL THINKING
THE NEW YORKER MAGAZINE
BY JAMES SUROWIECKI
MAARCH 21, 2016
In 1980, the third-party Presidential candidate John Anderson succinctly summed up Ronald Reagan’s promise to simultaneously cut taxes, increase defense spending, keep government services intact, and balance the budget: “Reagan’s budget is constructed with mirrors.” Sure enough, Reagan presided over eight years of deficits that tripled the national debt. Yet the Republican faith that you can tax-cut your way to deficit reduction has never dimmed. This year’s Republican race is dominated by candidates whose budgetary plans make Reagan’s look downright reasonable.
Not surprisingly, the most extreme plan is Donald Trump’s. He would slash taxes across the board, reducing revenues by nine and a half trillion dollars over the next decade, according to estimates by the nonpartisan Tax Policy Center. Yet he has also promised to balance the budget, protect Social Security and Medicare, and not cut services. How? Well, he says he’ll get rid of “waste and fraud and abuse,” and abolish the Department of Education and the Environmental Protection Agency. And he thinks that the tax cuts would spur an economic boom, so that revenues will actually increase.
This is pure fantasy. Those spending cuts would save just a tiny fraction of what he claims, and the revenue projections have no basis in reality. Yet, unrealistic as Trump’s ideas are, they differ from those of his chief opponents only in degree, not in kind. Marco Rubio wants to couple a $6.8-trillion tax cut with significant increases in defense spending, while Ted Cruz has proposed an $8.6-trillion tax cut with—guess what?—significant increases in defense spending. Naturally, Rubio and Cruz have been vague about where they’d find the necessary trillions in cuts, and about how what the government does would be affected. This is par for the course. Paul Ryan’s infamous budget of 2012 would have effectively eliminated nearly all the federal government’s non-defense discretionary spending, even as he insisted that he wanted to “strengthen” the social safety net and keep the government investing in infrastructure.
The candidates are engaged in a familiar dance. Voters always say that they’re worried about the deficit, but, as Brendan Nyhan, an assistant professor of government at Dartmouth, put it to me, they’re skittish when cuts are specified: “They may have a symbolic preference for cutting spending, but that’s different from their actual preference for spending on programs they like.” (A 2012 Pew poll found that the only program that voters were happy to cut was foreign aid.) So talking about spending cuts is risky: it’s safer to emphasize just the tax-cut part of your message. Still, we’ve now had thirty-five years of Republican candidates promising tax cuts, spending discipline, and balanced budgets, without ever delivering. Why haven’t voters woken up to this?
For one thing, decades of rhetoric about waste in Washington—one of Reagan’s favorite talking points—have skewed voter perceptions. “People think that there are a lot of ways to end fraud that would help balance the budget,” Nyhan says. Forty-nine per cent of those surveyed in a 2013 Fox News poll agreed that cutting “waste and fraud” could eliminate the national debt. In addition, voters have a poor sense of how government money is spent. When Trump says that he wants to close the Department of Education and the E.P.A., it might sound like a big saving. Yet their combined budgets amount to a small fraction of his proposed tax cut. Likewise with foreign aid: polls show that Americans think as much as a quarter of the federal budget goes to other countries, when it’s actually less than one per cent of total spending.
Voters have also been led to believe that tax cuts unleash such a tidal wave of growth that they pay for themselves. This supply-side dogma holds that, because tax cuts encourage people to work more and invest more (which is true), they can increase tax revenues relative to holding rates steady (which is not true). The empirical evidence is by now unequivocal that, with tax rates at U.S. levels, this doesn’t work; cutting tax rates simply leads to lower tax revenues, which is why, in the wake of the Reagan tax cuts, tax revenues as a share of G.D.P. fell. Yet for thirty-five years, through the Contract with America and the Bush Administration’s $1.6-trillion tax cut, the message has remained essentially the same: lower taxes, higher tax revenues. This message has been fact-checked and refuted over and over again, but, once something becomes an article of political faith, it’s difficult to dislodge. Indeed, Nyhan and the political scientist Jason Reifler carried out a study demonstrating that attempts to set the record straight can even reinforce misperceptions: self-described conservatives were shown evidence that the Bush tax cuts had lowered over-all revenues, but, Nyhan told me, “the information actually made them more likely to believe that the tax cuts had increased revenue.”
Voters didn’t come up with these misperceptions on their own. “The ideas spread because politicians and pundits told people they were true,” Nyhan says. “And once misperceptions are out there they’re very difficult to overcome.” In proffering a tax plan that seems self-evidently absurd, Trump is merely building on the foundation that Republican predecessors laid down and, as is his wont, pushing their ideas further than anyone thought they could go. In Trump, the Republican establishment has met its enemy: itself.
NOTE: So Americans, when you go to your local polling place next November, please remember that trickle down economics is what we've been subjected to for around three decades now. And, it is at the core of each one of the Republican candidates economic proposals for America. In essence, more of the same.
Have a good day!