Last Thursday's debate between Vice President Joe Biden and Congressman Paul Ryan witnessed something extraordinary: A Republican candidate making his way through a 90-minute debate without once invoking the blessed memory of Ronald Wilson Reagan.
The omission was doubly puzzling since it's now becoming much clearer that the way Paul Ryan and Mitt Romney intend to make the math work on their $5 trillion plan to cut all taxes down to 20% is to once again rely on the voodoo magic of Reagan's supply-side economics and the Fool's Gold that tax cuts pay for themselves.
Ryan and Romney stubbornly refuse to spell out which tax deductions they would eliminate in order to pay for their 15% tax cut across all income brackets, rightly reasoning that these "loopholes" for home mortgage interest, employer provided health care, 401K contributions and much else are popular with the middle class and, if cut, would almost surely cause middle classes taxes to go up, by as much as $2,000 per household according to some estimates.
Thus, when pressed how they would bring federal income taxes down without either adding to the deficit or shifting tax burdens from the rich to the middle class and poor, Romney and Ryan take refuge under Arthur Laffer's famous curve by responding: "Economic growth."
"Let's get a tax policy that encourages growth and investment, and doesn't just penalize people for being successful,'' said Romney during the Republican primary after unveiling his plan to slash marginal tax rates.
Yet, as today's Boston Globe reports, economic growth resulting from tax cuts is still required to balance Romney tax plan, and here is where "the harshest disagreements arise."
According to the Globe, the Congressional Research Service last month examined the historical relationship between top marginal tax rates and economic growth going back to 1945. It found none. Repeat: None. "Top tax rates appear to have little or no relation to the size of the economic pie,'' according to the report.
The Globe noted that the nonpartisan Tax Policy Center also said Romney cannot deliver all the tax cuts he promised to the wealthy without raising taxes on the middle class.
Further, the Joint Committee on Taxation said that even if Romney eliminated every deduction in the tax code, he and Ryan would only be able to pay for a 4% cut in tax rates -- far short of the 15% cut they are proposing to bring all rates down to 20%.
In reply, notes the Globe, President Obama has argued that Romney's "trickle-down'' policies have a 30-year track record of concentrating wealth at the top while producing record deficits and without robust economic growth - a pitiful record that perhaps explains why Romney introduced the clunky expression "trickle-down government" in their first debate in order to change the subject.
As the Globe notes, onetime supply-side proponent and Reagan domestic policy adviser Bruce Bartlett says Republicans should forever retire the idea that tax cuts pay for themselves. He was particularly harsh in his assessment of wealthy individuals and corporations who continue to back this doctrine, saying "it is in the best interests of rich people to want to believe this [because] it justifies cutting taxes, especially at the top.''
In last week's debate, Congressman Ryan seemed to suggest the idea that tax cuts produce economic growth was original with Democratic icon John F. Kennedy when JFK proposed jump starting a sluggish economy by bringing top marginal rates down from their punitive World War II level of 91% on top incomes to a "more sensible" 65%.
As I noted earlier, the 91% top rate was not primarily designed to raise revenues but rather as a regulator to keep inflation under control in the over-heated economy America had to have to fight a world war. President Eisenhower kept the rates in place throughout his two terms in office largely for that purpose. And when Kennedy proposed reducing taxes to stimulate the economy he was opposed by traditional fiscal conservatives in the Republican Party who worried about the impact tax cuts might have on budget deficits.
Bartlett studied the Kennedy tax cut, which was finally enacted in 1964 when President Lyndon Johnson cut the top marginal rate from 91% to 70%, and estimated only about a third of revenues sacrificed by the cut were recovered through growth, says the Globe.
The Romney campaign also cites 1986 when Reagan and House Speaker Thomas P. "Tip'' O'Neill Jr. reduced top rates from 50% to 28%. After that cut, says the Globe, "the growth rate remained relatively steady, then slumped and the economy fell into a recession in the early 1990s."
Now, Paul Ryan was merely playing for effect when he threw President Kennedy's name in Joe Biden's face at their debate last week because, as Ryan surely knows, the idea that tax cuts are stimulative is standard with Keynesian economics, as well. This is why the Obama $800 billion stimulus package that Republicans are so eager to dump on was almost equally divided between direct government spending and tax cuts.
No one disagrees that cutting taxes will stimulate the economy, just as no one contests that throwing gasoline on a campfire will cause it to temporarily burn hotter. The more important question is whether such stimuli are sustainable - whether putting more wood on a fire or blowing on its embers might be a better way to keep it going than fueling it with "liquidity," just as whether it really makes sense (if ones goal is more jobs and economic growth in this country) to give finite tax dollars to wealthy investors who might plant them overseas as Mitt Romney has done with his Bain Capital investments in China.
If the problem with our economy is not inadequate demand, as Democrats say, but rather that the rich do not have enough money in their hands, as Republicans contend, then what were we to make of the record $2 trillion in free cash currently sitting idle with America's banks and corporations - a large portion of which I would submit is being sequestered so as to deliberately suppress the economy to Obama's disadvantage in order that America's plutocracy can get the compliant Romney puppet regime these oligarchs so obviously desire.
There is a reason Paul Ryan did not bring up Ronald Reagan's name in his debate with the Vice President last week. It's because when Reagan jumped into the deep end of the supply-side pool he immediately found himself underwater as deficits began to rise - eventually increasing from $700 billion when Reagan came into office in 1980 to $3 trillion when he left.
History shows that right after passing the largest tax cut in American history, Reagan raised taxes eleven times throughout his term, including the largest corporate tax increase in history, which Joshua Green said would be "utterly unimaginable for any conservative to support today."
Ronald Reagan was never afraid to raise taxes, says historian Douglas Brinkley, who edited Reagan's diaries. "He knew that it was necessary at times. And so there's a false mythology out there about Reagan as this conservative president who came in and just cut taxes and trimmed federal spending in a dramatic way. It didn't happen that way. It's false."
Reagan raised taxes rather than allow the nation to drown in a sea of red ink -- unlike today's Republicans whose oath to Grover Norquist and the anti-tax leaguers is apparently more binding than the one they take with right hand raised and left hand on the Bible.
And so, when a mocking Joe Biden said in his own way that Congressman Paul Ryan was no Jack Kennedy, the Vice President might also have added that Paul Ryan and Mitt Romney are no Ronald Reagan either.