Tuesday, October 2, 2012

Paul Ryan on Mitt Romney's Tax Plan - Eliminate Any Surplus

"My math does add up.  Trust me."
Paul Ryan revealed a little too much today when discussing Mitt Romney's tax plan with Bloomberg News, insisting that the math that he refuses to disclose does indeed add up.  In trying to brush over the fact that Romney or Ryan has never explained how exactly they would tax voters or close loopholes in the tax code, Paul Ryan said the following:

"What we are saying is, by subjecting higher income earners' income to more taxation, remove tax shelters, lower deductions for higher income people, more of their income is subject to taxation so you can lower tax rates for everybody across the board and shelter the middle class from any kind of tax increase. There is obviously enough fiscal space to lower tax rates 20 percent, keep these middle-class preferences."

Ryan essentially says the Democrat's plans would work - increasing taxes and lowering deductions for the wealthy, removing tax shelters, and protecting the current rates for the middle-class - causing America experience a surplus - something that hasn't happened since the Clinton administration of the 90s.  The difference between Obama and Romney would be that the Republican candidate would then whittle away at that surplus ("fiscal space") by lowering taxes by 20 percent.

If anyone recalls, the Bush administration viewed surpluses as a backdoor for socialism and successfully gave America a wonderful record deficit.

The Center on Budget and Policy Priorities wrote the following analysis on Chairman Alan Greenspan's testimony back in 2001:
Chairman Greenspan noted that projected budget surpluses are sufficiently large that the public debt may be eliminated within the next ten years. At that point, continued surpluses would necessarily result in public investment in some sort of private assets (since there would be no debt left to pay down). Chairman Greenspan argued that public investment in private assets could lead to political interference in private capital markets and, as a result, would risk "sub-optimal performance by our capital markets, diminished economic efficiency, and lower overall standards of living than would be achieved otherwise." This is the so-called "peril of zero debt." To avoid that peril, Greenspan recommended that projected surpluses be dissipated in part through tax cuts.
What was their conclusion?
Given the experience of state and local government pension funds in the United States and of national governments in other countries in managing investments in private assets, and the protections that could be erected to avoid politicization of the capital markets from investments in private assets through the Social Security trust fund, the peril of zero debt does not provide a sound rational for enacting a large tax cut today. Passing a large tax cut merely to avoid the possibility of public investments in private assets would not represent sound policy.
Sounds pretty relevant today, right? 

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