Rob Shapiro, Chair of NDN's Globalization Initiative, and I have released the following memo:
Point One: Cutting Taxes Does Not Guarantee Growth or a Healthy Economy
The argument Romney has been making on the stump, that cutting tax rates drives broad based growth, strong employment gains and higher wages, is not supported by the evidence or experience of the American economy in the last twenty years.
In the 1990s Bill Clinton raised taxes on wealthy Americans and the US economy boomed – yet, we saw the longest expansion in US history, income gains across all income groups, lower levels of poverty, fast-rising stock prices, soaring corporate profits, and deficits that turned into surpluses.
In the Bush decade, we radically cut taxes and saw deficits explode, incomes decline for everyone but the very affluent, the housing bubble and then bust, a global financial collapse and of course the Great Recession.
Based on America’s experience over the last two decades, it would be appropriate for team Romney to be aggressively challenged in the coming days when they assert that tax cuts will produce a stronger US economy.
Point Two: Romney’s Plan Cannot Balance the Budget and Will Make Future Prosperity Less Likely
While there are many ways to reduce the deficit, there are three things which must happen to have any chance of bringing the budget into balance – the growth of spending for Medicare must slow, defense expenditures must be reduced, and taxes/revenues must be raised. This is simple math, as there isn't enough money in the rest of the budget to achieve balance without leading with these three areas.
Romney would slow the growth of Medicare spending by shifting much of the burden to retirees, and from published reports actually appears to be advocating to expand defense spending. Finally, the Romney tax plan appears to invoke the magical thinking of supply side economics to argue that cutting tax rates somehow increases revenues. This is an idea that has been disproven by the evidence and experience of our economy over the past generation. Taken together it means that Romney has no intention or capacity to produce a balanced budget, or one even close to balance.
Additionally, cuts in other areas of federal spending investment on the level that the Romney plan contemplates would require significant reductions in the things which most economists agree are essential to long term prosperity - education and training, infrastructure, and government funded R&D. The notion that in a time when America must do more to compete with rising levels of competition in the global economy that we should dis-invest in skills, infrastructure and R&D, seems less like a roadmap for prosperity than a guarantor of national decline.