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Republican Tax Plans Won't Stop National Debt From Swelling: Study

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REPUBLICAN DEBATE
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* Front-runners' tax cuts seen outweighing spending cuts

* Gingrich, Santorum's plans would add most to national debt

* Paul's plan could produce some cuts, but not significant

By David Lawder

WASHINGTON, Feb 23 (Reuters) - The U.S. national debt will continue to swell under the tax-cut plans floated by the top four Republican presidential candidates, according to an independent analysis of their fiscal policy proposals released on Thursday.

Plans put forth by Newt Gingrich and Rick Santorum would pile up the largest increases in debt, while Mitt Romney's would add a smaller amount of debt over the next decade compared with debt growth if tax policies implemented by former President George W. Bush are kept in place.

The report from U.S. Budget Watch, a project of the non-partisan Committee for a Responsible Federal Budget, aims to apply a reality check to the claims being made on the campaign trail.

Republicans jockeying for their party's nomination for the Nov. 6 election are promising to fuel growth with tax and spending cuts and bashing Democratic President Barack Obama's calls to raise taxes on the wealthy.

"Are they making proposals that risk making the debt problem worse?" said Alice Rivlin, a former head of the Congressional Budget Office and Federal Reserve vice chairman who now serves on the group's board. "On that score, all of these candidates fail. They all reduce the revenue that is available to the government over time."

The group offered three scenarios for each candidate's proposals - the most pessimistic gives them credit for all vague, non-specific spending cut percentage goals they have put forth. The most pessimistic excludes non-specific and politically unlikely proposals, while a middle scenario provides credit for some of these proposals for discretionary spending cuts.


ANALYSING THE PLANS

The group said the middle path for Gingrich would add $7 trillion to the national debt by 2021 versus the baseline, largely because he has proposed deep tax cuts for individuals and corporations, including an alternative 15 percent "flat tax."

This would boost debt as a share of the overall economy to 114 percent in 2021 from the current level of about 70 percent, compared with an anticipated 2021 baseline level of 85 percent.

The middle scenario for Santorum's plan would add $4.5 trillion to the debt, also due to tax cuts. The scenario excludes a pledge by Santorum "to commit to cut $5 trillion in federal spending within five years" because these cuts were not specified. The debt-to-gross domestic product ratio would rise to 104 percent under this plan.

Romney's middle-path analysis would see a $250 billion increase in debt by 2021 as more of his spending cuts were specified, including deep federal workforce cuts and reducing the Medicaid healthcare program for the poor to a block grant program for the states. The debt-to-GDP ratio would end up at 86 percent under this plan, 1 percentage point above the baseline.

Ron Paul's middle scenario was the only one to reduce debt compared with the baseline - by $2.2 trillion - largely due to deep spending cuts on benefit programs and elimination of five federal departments and many State Department programs.

But the more pessimistic program scenario for Paul shows that it would boost debt by $1.9 trillion. The 76 percent and 93 percent debt-to-GDP ratio under these two Paul scenarios would still be above the current level of 70 percent.

"Unfortunately we're not at a place where we can balance the budget in the short term unless there is tremendous economic growth," said Maya MacGuineas, the group's president. She added that the goal should be to keep the rate of debt accumulation below the economy's growth rate.

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