Over the last several decades, there has been a clear trend in how each of America’s political parties handles budgets and, by extension, deficits.
The trend began with Ronald Reagan, who more than doubled the deficit. This new normal of deficit spending was continued by George H.W. Bush, who left Clinton with a $200 billion deficit. However, Clinton took that deficit and turned it into a surplus for his last 4 fiscal years, the longest running surplus since the “roaring 20s.” George W. Bush somehow turned that surplus into a 1.4 trillion dollar deficit, the largest in United States history. Since taking office in 2009, President Obama has cut that deficit by about 70 percent.
The message is clear: There is a fiscally responsible party, and it is not the Republicans.
Which is why it was unsurprising to see Rand Paul unveil a tax plan last week that would continue the proud tradition of his ideological forebears in sinking us deeper into deficit and, through it, debt.
The tax system, which he calls “The Fair and Flat Tax,” an amalgamation of “flat tax” and “fair tax” proposals beloved by the Tea Party, is laid out in his op-ed for The Wall-Street Journal:
I am announcing an over $2 trillion tax cut that would repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses.
By his own admission, this would decrease revenue by $200 billion per year, a nearly 50% increase on Obama’s current deficits. To avoid this, Rand says that he would cut as-yet unspecified spending programs.
To Rand’s credit, some of these cuts could come from the military. His budget proposal in 2013 included about an 11% cut to military spending: from a projected $588 billion in 2014 to $521 billion after that. Of course, that wouldn’t be anywhere near enough to pay for his tax plan, and Rand didn’t have to impress GOP primary voters at that time, so if he intends to make the math work to get his tax plan to revenue neutrality, he’s certainly going to have to go after lots of domestic programs. Past legislative campaigns against the Department of Education, Medicaid and food stamps, which Rand Paul has not-to-subtlely called “slavery.”
Food stamps are a cornerstone of the American social safety net, and produce remarkably efficient economic multipliers. Every five dollars of money spent by the government on food stamps creates up to nine dollars in economic activity. It pulls up to 4 million people out of poverty per year. Food stamp programs have demonstrably reduced the risk of low income children getting hypertension, obesity, and diabetes by as much as 68%. Far from being the seeds of dependency, the program reduces food insecurity and allows beneficiaries to focus on getting a job instead of where they’ll get their next meal. The result is that well over half of families are working within a month of receiving food stamps and over 80% are employed in the year following receiving food stamps. What’s more, many families who receive food stamps already have a job, but are kept in need of food assistance by a too-low minimum wage, a byproduct of our corporate welfare apparatus that Rand Paul opposes raising. Rand believes that minimum wage jobs are for children, and doesn’t seem to have a clear path forward for these families who depend on it once he cuts their ability to get food and reduces their pay.
Ignoring and at times flatly denying these facts, Senator Paul claims that his tax cuts for businesses and the wealthy will trickle down. He also says that “the left will argue that the plan is a tax cut for the wealthy. But most of the loopholes in the tax code were designed by the rich and politically connected.” That’s a good line, but it doesn’t say anything about whether his plan will have net positive or negative effects on the wealthy’s tax rates. And the data don’t back him up: While it’s true that loopholes are written for and exploited by wealthier interests, it’s also true that Paul’s plan would feature businesses paying an average of 5 percent less than businesses are paying under the current system, even once every tax loophole is closed.
Senator Paul will argue on the trail that these tax cuts will help businesses hire more workers. This assumes that businesses hire based on something other than need. The motivation of a business is to maximize profit; taxes affect how much profit businesses get to distribute amongst their shareholders keep, but not how much is generated, which is why there is no correlation between tax cuts and job creation.
What stimulates job creation is increasing demand. More demand creates a greater need for more goods, which creates a need for more jobs in order to raise a corporate profit margin. The only way to raise demand is to raise the buying power of the people. Money in the pockets of the people, not corporations, drives economic growth.
A flat tax is intrinsically regressive. The more you have, the less likely a flat tax is to bite into the money you need for your necessities. Rand’s plan would decrease revenue just for the sake of being able to cut taxes for the wealthy and for corporations, and he intends to make up for it with bad economics, bad math and a spending policy that would devastate some of our most important economic stimuli. It would leave millions of people in poverty and millions of children in greater need of health programs.
Which, of course, he would repeal.
Slight inaccuracy in original article has now been corrected