Newt Gingrich, Rick Santorum Tax Plans Would Explode Budget Deficit: Study
WASHINGTON — Massive tax cuts proposed by GOP presidential candidates Newt Gingrich and Rick Santorum would cause the national debt to explode while Mitt Romney's budget plan could generate red ink in line with current projections, according to a new study released Thursday.
The nonpartisan Committee for a Responsible Federal Budget, a Washington-based budget watchdog group, estimates that the wrenching budget cuts proposed by Ron Paul would lessen the flow of red ink compared with current policies but still leave the government running a sizable deficit.
The GOP candidates' budget plans provide a sharp contrast with President Barack Obama, who released his latest fiscal blueprint just last week that includes proposals to raise taxes on the wealthy.
Like Obama, the GOP candidates have the luxury of suspending political reality and assuming lawmakers would quickly enact their ideas into law.
That translates into a tax code in which taxes on investments and capital gains are sharply reduced or eliminated. Each GOP candidate would eliminate inheritance taxes on large estates. And tax rates on individuals would be cut as well – all in the face of deficits that economists say would eventually cripple the economy.
The results, according to the study, would be higher deficits, except in the case of Paul, whose spending cuts dwarf anything being considered by his three rivals.
According to the study, Gingrich's plan would add $7 trillion to the nation's debt over the coming nine years – almost doubling the deficits that would be recorded if the government basically ran on autopilot. Santorum's plan would add $4.5 trillion over the period, or about $500 billion to the deficit every year on average.
By contrast, Romney's proposal would add $250 billion to the deficit over nine years, though that estimate was generated before he unveiled a new tax proposal this week that could add considerably to the deficit.
And Paul, whose budget plans include eliminating five Cabinet departments, immediately ending operations in Iraq and Afghanistan, and sharply cutting federal programs like Medicaid and food stamps, would reduce the deficit by $2.2 trillion. He is the only candidate whose spending cuts exceed the amount of revenue lost by cutting taxes.
By the end of fiscal 2016, little more than a month before Election Day, Gingrich's plan would produce a deficit of 7.8 percent of the economy, or almost $1.5 trillion. Santorum's blueprint would produce a deficit in the $1.2 trillion range, or 6.5 percent of gross domestic product. And Romney's plan – given the benefit of the doubt since his new tax plan is so vague – would generate a 2016 deficit of between $700-800 billion or so. Paul's plan would leave a 2016 deficit of almost $500 billion.
Obama's budget claims a $649 billion deficit by 2016, relying on tax increases to do it.
The group didn't publish specific deficit figures for 2016 but provided estimates of them as a percentage of GDP to The Associated Press, which calculated them based on the economic estimates of the Congressional Budget Office.
The four GOP candidates vying to replace Obama each promise sweeping tax cuts, even as the deficit under current policies would never fall below $600 billion over the coming decade.
Gingrich, for example, would give taxpayers the option of a 15 percent flat tax rate, while Santorum promises to reduce the current five-bracket system to two, with rates of 28 percent and 10 percent. Each idea would mean trillions of dollars less in revenue for the government.
Romney's latest tax plan would cut the top income tax rate from 35 percent to 28 percent and the other rates by 20 percent each, paid for by broadening the tax base and eliminating numerous deductions. But the plan lacks sufficient specifics to be "scored" with any precision.
The candidates' ambitious budget plans contrast with GOP leaders in Congress, who have focused on retaining the full menu of Bush-era tax cuts rather than attempting to cut taxes further – and have opened the door to higher tax revenues as part of a comprehensive deficit-cutting deal.
Last week, Obama proposed tax increases of almost $2 trillion over the coming decade – chiefly by ending Bush-era cuts on individual income exceeding $200,000 and year and family income exceeding $250,000.
The budget group's advisers include many Democratic deficit hawks and Republicans unafraid to advocate for higher taxes. The group acknowledged plenty of wiggle room in the study since many of the candidates' proposals are vague or haven't been reviewed by official sources, like the Congressional Budget Office.
The Tax Policy Center, a respected joint project of the Urban Institute and the Brookings Institution, provided the basis for many of the estimates of the candidates' tax proposals.
The group offers three different scenarios for each candidate, which incorporated different assumptions that depend on how vague or specific a candidate's proposals are. The group chiefly trumpeted an "intermediate" scenario that represented the group's best estimate of the candidate's budget plans.
By contrast, the Gingrich campaign Thursday produced an estimate by a friendly economist that predicts his budget would balance by the end of his first term and that economic growth under his supply-side tax cuts would average 4.4 percent a year over the coming decade, far higher than predicted by the budget group.
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ANDREW TAYLOR 02/23/12 06:05 PM ET Associated Press