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Douthat And Pawlenty

Ross Douthat blasts Tim Pawlenty's tax plan.  RTWT as they say but this is a taste:

You'll recall that Bush cut taxes on upper earners, capital gains, estates, dividends, etc. He also cut taxes on families and the middle class. He also cut taxes without offsetting the cuts with spending reductions, on the assumption that growth would take care of any deficits that ensued. He didn't reform the tax code by shrinking the number of brackets, as Pawlenty proposes to do. As Schulz notes, Bush's mix of policies earned disappointing results -- not necessarily in terms of overall growth rates (at least before the financial crisis), but in terms of wage growth for middle class and downscale Americans, and in terms of their impact on the national debt. So against that backdrop and amid those memories, the Pawlenty plan would send Republicans to the hustings with a tax plan that's likely to increase the deficit, and with the argument that the reason wage growth for the middle class was so disappointing in the Bush years was that Bush's tax policies were too weighted toward middle-class concerns (!), and didn't go far enough in flattening the tax burden and lowering rates on investors and the rich. In other words: Dear middle class American, we're going to address the economic anxieties you experienced in the '00s with a deficit-increasing tax reform that's much more favorable, in its initial impact, to the wealthiest quintile of the country than were the Bush tax cuts.

Yeah, me too, but my concerns are a little different.  They are:

Pawlenty's tax plan cuts tax revenues far more sharply than Ryan's PTP while planning to spend far less.  Ryan's PTP projects getting spending down to 20.25% of GDP over the next 18 years.  There are reasons to think that this still won't leave enough revenue to pay for Medicare even under a reformed system.  As Reihan Salam and others have pointed out, a more realistic Medicare reform plan would grow Medicare spending at GDP +1 rather than at Ryan's cocktail of consumer prices indexes.  That is going to cost more money than Ryan budgets for (though it is about what Ryan budgeted for in his original Roadmap.)

Pawlenty is for capping federal spending at 18% of GDP.  That would mean taking Ryan's already underfunded PTP budget and cutting it by over 10%. So Pawlenty's program would amount to enormous tax cuts to high earners + large entitlement cuts (they would have to be substantially larger than those in the PTP unless Pawlenty proposed huge defense cuts too.) And, as Josh Barro points out in one of the above links, we would still have an annual deficit of 3% of GDP even under a set of assumptions friendly to the Pawlenty program. 

I'm trying to think of a circumstance where this program could win a general election.  I guess if people were mad enough at Obama that a majority of the public buys that Pawlenty's tax cuts would only slightly reduce revenue (because of the resulting growth) and chooses to ignore the size and consequences of the cuts that would be required in order to make the Pawlenty plan's deficits just barely sustainable.  It sound more like a plan to snatch defeat from the jaws of victory.  

 

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