Mitt in Wonderland: Shrink the debt AND cut taxes by 20%?

Rick Santorum points to the GOP's 2012 nominee to be president of the United States

Prior to last night’s debate, Mitt Romney released an updated version of his tax plan, which now calls for a 20 percent reduction in marginal tax rates across the board. And while the top tax rate would drop from 35 to 28 percent, Romney pledged yesterday afternoon that he would take steps to ensure that the top 1 percent wouldn’t reap huge benefits.

“And by the way, I want to make sure that you understand, for middle-income families, the deductibility of home mortgage interest and charitable contributions, those things will continue, but for high income folks, we are going to cut back on that so we make sure the top 1 percent keeps paying, paying the current share they’re paying or more. We want middle-income Americans to be the place we focus our help, because its middle-income Americans that have been hurt by this Obama economy.”

However, a few hours later, after Rush Limbaugh went on the air to condemn Romney for buying into the “1 percent vs. 99 percent” meme, and after Rick Santorum attacked him for the same thing, Romney changed his tune, asserting in the debate that “Number one, I said today that we’re going to cut taxes on everyone across the country by 20 percent, including the top 1 percent.”

Now, the vision of Romney publicly flip-flopping on his own plan in a matter of mere hours should not alarm you. The man’s a professional; he has done this kind of thing before. He can shown the ability to twist himself into knots that would break the spine of mere mortals. In fact, once his political career is over, he’s going on the road as a contortionist with Cirque du Soleil.

In the meantime, however, we have this tax plan to consider.

In the past, Romney has said that current debt trends are unsustainable, and they are. He has said it is immoral to continue to pile debt on our children and grandchildren, and it is. He argues that we’re going to have to make cuts in entitlement programs, and we will.

However, I do not know how it is possible to make such statements about the debt and then turn around and promise to “cut taxes on everyone across the country by 20 percent, including the top 1 percent,” as he did last night. Even for Romney, this is a challenging contortion.

The bipartisan Center for a Responsible Federal Budget (see note below) has taken a look at Romney’s new plan and has concluded that if he really does enact the promised 20 percent tax cut, federal debt as a percentage of GDP would rise from 68 percent in 2011 to 96 percent by 2021.

The CRFB has also analyzed the impact of the proposed Obama budget. Using what it believes to be more realistic economic and spending projections than provided by the administration, CFRB says that by 2021, the Obama approach would produce a debt-to-GDP ratio of 84 percent. While high, that is considerably lower than that produced under the Romney approach.

In the debate last night, Romney promised that if elected he would look at every federal program and ask, “Is this program so critical that it’s worth borrowing money from China to pay for it?” It’s an effective rhetorical device, and not a bad way to look at spending proposals either.

However, honest debate requires the admission that a 20 percent cut in taxes would also be financed by borrowing hundreds of billions of dollars from China and elsewhere. Over the long term, the hard truth is that to reclaim control of our fiscal future, we will have to raise taxes, not cut taxes, while we also reduce spending. To suggest that we can make progress on such a goal while slashing taxes yet again is economically, mathematically and morally fraudulent.

– Jay Bookman

NOTE: From 9:30 to 11 a.m., CFRB will present a streamed update of its analysis of the tax and budget plans of the Republican presidential nominees. It can be viewed here.