- That Obama created the deficit
- That Obama raised taxes.
- There are both true and both bad and thus both are reasons to vote Republican.
But let me put that aside for the moment, and first point out the absurdity of the idea that the deficit can be your #1 issue when you’re calling for TAX CUTS! Now… am I saying tax cuts are BAD? No. Not at all. They stimulate the economy. That’s right. You read that right. They DO. In fact the idea that cutting taxes can stimulate the economy if every bit as much part of the Keynsian economic model as the fact that increasing spending stimulates the economy is. And both work the same way: The multiplier. If you cut taxes, or increase spending you increase the income of America by [some multiplier, greater than 1] times the amount of the change. And like wise raising taxes and cutting spending will have the same negative effect: the income of America will change by [some negative multipler, greater than -1] times the amount fo the change. Conservatives are more than happy to accept the tax half of the Keynsian model, but for some reason they can never seem to swallow the spending side of it. And the real kicker is that the multiplier ofr spending are GREATER than the multipliers for taxes. The end results is that a balanced budget always has a multiplier of “1.” If you raise taxes AND raise spending by [X] collective income will INCREASE by [X]. If you cut taxes AND cut spending by [X] collective income will DECREASE by [X]. They never buy it, but if you take an economics course, regardless of the ideology of the professor, you will learn this. It’s a FACT.
Now… some will argue that the multiplier effect I mentioned earlier can fix this. That if we cut taxes (for example) the resulting growth will result in more tax revenue. (Or at least as much as we had before.) That’s the idea behind the now widely discredited Laffer Curve. Personally I think Laffer had a legitimate point, but he his partisanship caused him err when trying to figure out where exactly on the curve we were, as well as what the exact shape (slope) of the curve is, and where the center of it is. In any case, let me demonstrate why tax cuts (or spending icreases, for that matter) will never “pay for themselves,” why they will ALWAYS contribute to the deficit, unless offset by spending cuts (or tax increases):
Even IF one considered the multiplier effect, the results are still nowhere near where they need to be. To turn a $5 tax cut into $20 of taxable income requires a multiplier of FOUR. And no legitimate economist goes throwing numbers like THAT around lightly. I'm not saying it's impossible, just that your going WAAAY out on a limb to assume it. Here, for example, is a graph by Mark Zandi of Moody’s showing the benefit of each dollar spent on various parts of the stimulus package in 2008:
Now, granted one could claim this is “just some liberal rubbish,” but do you notice how the highest multiplier is still under TWO? (~1.7) Even for the “liberal” stuff that he'd be trying to sell?! Nothing ANYWHERE NEAR the four that we'd need.
Now, that 300% return (multipler of 4) only applies to a 5% cut from a 30% base tax rate. Here’s a chart I worked up, showing how much growth you’d need (and the required multiplier) for a given tax cut to pay for itself. Feel free to go in there and monkey with the numbers if you want. The point still stands. You can see that unless you’re talking about very small tax decreases, from very large rates, you’re talking about growth rates that are only ever talked about in classroom examples. They have no place in business projections (indeed any business would go broke VERY FAST if it relied on this kind of growth assumption) and should have no place in policy discussions.
"Part Two" will show why, in addition to being assinine when taken together, both a flat out FALSE individually as well.