Obama's Disappearing $5 Trillion
The President's advisers concede 80% of Romney's tax-cut math.
WSJ Editorial, October 10, 2012
In last week's presidential debate, President Obama seemed stunned to learn that the "$5 trillion tax cut" in his talking points, financed by a mythical middle-class tax increase, does not exist in Mitt Romney's economic plan. But now, even after the Obama campaign staff has acknowledged the error, why won't the President?
At last Wednesday's debate in Denver, Mr. Romney explained that he doesn't plan to cut taxes by $5 trillion. This is because, while his plan rolls back individual income tax rates by 20% and cuts the corporate rate to 25% from 35%, he also plans to reduce personal and corporate deductions.
The idea is that lower rates but fewer loopholes and the faster economic growth that results can generate a similar amount of tax revenue. The Republican also stated once again that his plan does not include a tax increase on the middle class.
Mr. Romney has been saying this for months, and over the weekend Obama campaign spokesman Jen Psaki conceded 80% of the argument. En route to California with reporters aboard Air Force One, Ms. Psaki said that the elimination of enough deductions and loopholes could in fact cover $3.8 trillion. That becomes $4 trillion if you include fewer interest payments on less debt, which means the Obama campaign was saying as of Sunday that the Romney "tax cut" was $1 trillion, not $5 trillion.
But soon after Air Force One landed, it became clear that either Mr. Obama hadn't gotten the memo—or didn't like what it said. At a Los Angeles fundraiser, Mr. Obama repeated the bogus claim that his own campaign had just repudiated.
The President said, "And when my opponent proposes $5 trillion worth of tax cuts, $2 trillion of additional military spending that our military is not asking for, and doesn't provide a single detail on how to pay for it, what that means is either we're going to be blowing up the deficit or we're going to be sticking it to folks who can't afford it."
So the Romney campaign and the Obama campaign agree that President Obama is wrong. There is no $5 trillion tax cut. But before retreating to Ms. Psaki's seemingly more reasonable $1 trillion figure, Mr. Obama should think twice.
Turns out there's trouble with that estimate too. Princeton economics professor Harvey Rosen, cited by the Obama campaign as a source for the claim that the Romney plan must raise taxes on the middle-class to avoid increasing the deficit, now says that Team Obama has been misrepresenting his research.
In fact, his work shows that increased economic growth from a more efficient tax code and lower marginal tax rates will allow Mr. Romney to cut rates and deductions while avoiding both a rate hike on the middle class and a deficit increase. Maybe Mr. Romney's reasonable, coherent explanation for this is why he won the debate.