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Is Romney Lying?
Commentary on the News
Monday, October 08, 2012
Ed DeShields

The Democrats have shifted their political strategy charging that Presidential candidate Mitt Romney is a liar.  Is he? 

They don’t just say Romney is wrong, but that he’s dishonest. 

The basis for the Democrats claim is that the arithmetic of tax reform that Romney proposes is hiding his secret tax increase on the middle class and that he is either incapable to understand it, or he’s lying about it to the American people when he claims otherwise. 

That’s a strong charge not before heard at this level of politics. 

The Obama team can’t very well make the case that Mr. Romney is unqualified, or incapable.  One simply has to look at the results of the first Presidential Debate.  So, the Democrats are left with characterizing him as a dishonest liar. 

Is Mr. Obama right?   Is Romney hiding something?  To understand the political battle let’s first take a look at the strategy behind the charge.   

What the Democrats most want in an economic plan is what they call a “balanced-approach doctrine” around their concept of fairness.  It is “fairer” for those more fortunate to share (i.e. pay) more than those at the bottom they say.  Forget the fact they already do. 

To the Obama team the bottom also means the middle and Mr. Obama says society benefits most from the “middle out” verses the “top down”.  

The Obama team’s “liar”argument is framed by using a study by the Tax Policy Center (center-left Brookings Institution and Urban Institute) that says Romney’s math doesn’t add up.  Mr. Obama says that Romney’s plan to cut taxes by 20% on everyone, while eliminating deductions only on the rich, is not fair – even though it looks fairer, in reality than Obama’s own plan when you consider Obama’s own core measure for defining fair. 

According to Mr. Romney, his plan takes money from the rich so they pay more.  But simultaneously Romney makes the tax burden less on everyone – thereby making the tax rates fairer for all people – including the middle and lower income population.

The Obama team knows their argument is weak – unless they make Romney look like he can’t be trusted.  So they have to claim that Romney’s plan is neither mathematically possible, they say, without blowing a hole in the budget, or worse, risk denying half the population their social benefits.

So is it mathematically possible?   

The Democrats operate their campaign under the rule that campaigns are not for educating the voter.  It is for persuading them with a position.   That’s where the voters have to pay attention.   That’s where understanding the issues can seem a little wonkish. 

What the Obama team isn’t telling us that the TPC isn’t grading Mr. Romney’s actual plan.  They’re grading their interpretation of Mr. Romney’s plan.  And, to protect themselves from a backlash of such a charge, the Obama team quickly adds that Mr. Romney hasn’t told anyone about his plan – so they’ve made some assumptions for him.  That, they say, makes Romney dishonest. 

Of course, this positions the Democrats for a counter-charge of not letting the truth spoil their own story

Now let’s look at what Mr. Romney actually proposes.  

TPC (and the Obama team) claims that Romney cannot cut tax rates by 20 percent across the board without raising taxes on the middle class.  But, this isn’t what Mr. Romney is proposing.  Romney proposes to reduce the taxes on everyone and he will close the deductions on rich people by adding taxes to certain investments on the wealth that the “fortunate” own. 

According to TPC, in the year 2015 Romney's tax plan would have to shift at least $86 billion away from high-income taxpayers onto lower- and middle-income taxpayers if you didn’t want the budget to balloon.  They say this is true even if Romney cuts the loophole deductions for high-income households. 

So, according to the Tax Policy Center perception of Romney’s plan, we start out with an $86 billion hole in the budget.

But remember the TPC isn’t considering Romney’s plan.  It’s considering Romney’s plan with its own “assumptions”. 

However, the TPC's own calculations show that that $86 billion hole can, in fact, be filled without raising middle class taxes – a fact the Obama team doesn’t want us to know about.

TPC's study starts by assuming that Romney’s pro-growth tax reform cannot produce any economic growth.  But remember, it sheepishly acknowledges that, according to an economic model created by Harvard professors Greg Mankiw and Matthew Weinzerl, Romney’s plan does produce enough growth to recover another $53 billion in taxes – far more growth and revenue than Obama’s plan. 

Further, and to really get wonkish, taxing the wealthy (the Romney way) will push the wealthy into to different investments that create growth faster (which creates a specific number of jobs according to his plan).   More growth, more jobs faster.

Even so, remember the fact that economic growth only fills $53 billion of that $86 billion hole.  So, where is the rest going to come from?  That still leaves us $33 billion short.

The TPC also acknowledges that its study assumes that Romney would not touch two big benefits that more wealthy investors usually receive;  (i) the exclusion of interest on state and local bonds and (ii) the exclusion of inside-buildup on life insurance vehicles (this is where big insurance companies really make their money). 

According the TPC eliminating these tax benefits from the wealthy raises an additional $45 billion. 

The bottom line?  Economic growth ($53 billion) plus cutting the tax benefits for the wealthy ($45 billion) equals $98 billion. That's $12 billion more than the $86 billion needed to prevent a middle class tax hike.  

So what the TPC is really saying is that Romney’s plan is mathematically possible. 

Yet, the Obama team clings to its own version of the truth; the version of the truth they must risk to be elected another four years.

DeShields" href="http://www.omegaletter.com/content/?Bio_Ed_Page">About Ed DeShields

Last article: Who Caused the Financial Crisis?  



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