I wrote back in early October about the Republican desire to use “dynamic scoring” in the budget process: it’s basically fantasy-based budgeting that assumes that tax cuts will generate massive revenues through economic growth that pays for the cost of the tax cuts.
We know, of course, that tax cuts do not in fact create jobs or lead to economic growth. Any budgetary scoring that assumes any variables for higher economic growth and revenue based on a corporate tax cut is operating on conservative ideological pixie dust.
Nevertheless Republicans seem determined to go through with it to help them pass “tax reform”:
“I believe the expanded and sensible use of dynamic analysis can, if done correctly, be an important tool to help us achieve our goals,” he said. Republicans have committed to an overhaul that would eliminate some tax breaks and reduce the corporate tax rate to 25% from 35% without increasing the budget deficit. Using standard congressional scoring, Republicans would have to cut a host of tax breaks coveted by businesses to accomplish the goal. Dynamic scoring could alter that equation.
“At the end of the day, it may mean that you don’t have to eliminate as many loopholes as you might have thought you had to,” said Scott Hodge, president of the nonpartisan Tax Foundation.
America has a corporate tax problem: our official corporate tax rate is higher than that of most other industrialized democracies, but the number of loopholes and giveaways in the tax code means that the effective rate is far lower. If we had a functioning Congress we would get rid of the worst loopholes and subsidies (say, for Wall Street and oil companies) while lowering the official rate–thus putting medium and small-sized corporations on better footing and generating revenue at the same time.
But, of course, that would be hard work and it would anger major conservative constituencies. Republicans would prefer to simply cut the corporate rate without touching the loopholes at all. But there’s the pesky problem that doing so would dramatically increase the deficit, about which Republicans have been spending the last six years crying wolf.
The easiest way to “solve” that problem is to use fantasy budgeting to pretend that a corporate tax cut will magically generate huge economic growth, making the cuts revenue neutral.
They won’t, of course, but since when has the GOP cared about being tethered to reality? If they get a tax cut using dynamic scoring today and the deficit predictably skyrockets, they can always just blame “liberal spending” and come back saying that government needs to tighten its belt.
The only wrinkle in the “starve the beast” conspiracy these days is that many of their less savvy tea party congressmembers and constituents actually have been led to believe that the deficit is a real problem, rather than a bugbear to bring up whenever a Democrat is president in order to stymie their agenda. So now they need to starve the beast without looking like that’s what they’re doing, even to their own members.