October 04, 2012
Morning Edition’s fact check of comments in the debate badly misled listeners by implying that choosing between reducing deficits between higher taxes and greater growth through tax cuts are alternative paths to deficit reduction that people can choose from like flavors of ice cream at the ice cream store. They are not.
There is no plausible path through which a tax cut will generate enough growth to even pay for itself, much less produce additional revenue. The best analysis of this issue was done by the Congressional Budget Office in 2005, when it was headed by Douglas Holtz-Eakin, a Republican who was the chief economic advisor to Senator McCain in his presidential campaign. His analysis found that using the most favorable set of assumptions, additional growth could temporarily replace one-third of lost revenue. This revenue increase was largely offset by slower growth in the longer term.
The country also had the opportunity to experiment with cutting taxes as a way to increase revenue when President Reagan cut taxes in the early 80s and President Bush cut them at the start of the last decade. In both cases, deficit rose considerably as revenue fell. It would have been helpful to supply this information to listeners who may be less familiar with economic research or recent economic history.
The analysis also said that both President Obama and Governor Romney believe in energy independence. That is unlikely since it is almost inconceivable that the United States will become energy independent any time in the foreseeable future unless it imposed huge protectionist barriers on imported oil. Presidents and presidential candidates have been talking about energy independence for 40 years, there is no reason to believe that these two candidates are any more serious than their predecessors.
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