Mitt Romney (Source: Toby Alter (CC))
I don’t want to cost jobs. My priority is jobs. And so what I do is I bring down the tax rates, lower deductions and exemptions, the same idea behind Bowles-Simpson, by the way, get the rates down, lower deductions and exemptions, to create more jobs, because there’s nothing better for getting us to a balanced budget than having more people working, earning more money, paying more taxes. That’s by far the most effective and efficient way to get this budget balanced.
This comment has been bothering me since the debate. Not a lot of attention is directed towards it either. Instead, Big Bird has been monopolizing the attention.
Everyone agrees that the deficit is overwhelming. It will total $1.1 trillion for 2012. The obvious question is how to lower it. There are three ways: cut spending, raise revenues or increase the tax base. No one likes the first two choices. Everyone likes the last one. In particular, Mitt Romney.
Romney’s plan is that he will cut the tax rate, allowing businesses to invest in jobs, and then when everyone pays their taxes there will be fewer exemptions so the tax rate cut will be balanced with the removed exemptions. Romney also proposes making cuts in spending, except for defense, which he wants to increase. According to Romney, the big factor in cutting the deficit will come from taxes of all the people who have new jobs.
Now, you may or may not agree with this. Personally, I think it is comparable to believing in the tooth fairy, although the tooth fairy does leave money under the pillow. Romney’s plan can’t do that and isn’t going to come close to balancing the budget.
Let’s look at the facts behind this. As I mentioned, there are three ways to balance the budget: cuts, taxes or increase the revenue base. Romney is proposing cuts, but he also proposes increasing spending for defense. He can save money but not enough to bring the $1.1 trillion to zero. Tax increases are out, according to Romney. That leaves only increasing jobs to balance the budget.
If we assume that Romney is able to cut $600 billion from deficit (and that is highly unlikely), that leaves $500 billion left to be raised by new jobs. Remember, Romney calls this “by far the most effective and efficient way to get this budget balanced.”
Let’s just assume that Romney’s new jobs equal the per capita income of the United States. That figure is currently around $42,000. For ease of calculation purposes, I’ll round down to $40,000. Once again, we’ll make an assumption. This assumption will be that 20% of the income goes to taxes. The truth is far less than that. This assumption brings in $8,000 per job. That is very generous, if not unrealistic.
That is not all that is unrealistic either. Even with this generous number, it is not possible for jobs to solve the remaining deficit. To total $500 billion, it would take over 62 million of these $40,000 jobs. There aren’t that many unemployed, even if all those who have given up and dropped from the workforce are considered. Even if the jobs paid $100,000 with the same 20% tax rate, it would take 25 million of them to balance the budget. A Romney administration would need to create over 500,000 of these jobs every month to reach 25 million at the end of 4 years.
Twenty-five million jobs at $100,000 a piece? That would be the greatest economic boom in the history of civilization. If Romney can do that, then he deserves to be president. However, that is pure fantasy.
Romney is very wrong that jobs are “by far the most effective and efficient way to get this budget balanced.” Maybe 12 million jobs could be created in a Romney administration at the value of $40,000 each. However, that would only raise $100 billion in revenue. That is a lot of money, but only a drop in the bucket of what is needed.
Simply creating jobs is not going to be able to balance the budget, but it makes a good campaign slogan to fool the voters.
