I see that the editors of the Washington Post have noticed the same thing that struck me yesterday—that the cuts in tax expenditures in Jeb Bush’s tax plan were a lot smaller than the tax cuts:
Mr. Bush’s plan would reduce federal revenue — a lot. An analysis from Mr. Feldstein and three other economists estimates that, without accounting for any added economic growth the plan might spur, the tax scheme would lose the government an astonishing $3.4 trillion over 10 years. A “dynamic” analysis estimating the effects of added economic growth still predicts a loss of $1.2 trillion.
and as I noted yesterday once defense spending is off the table there isn’t a lot to cut. I’m also skeptical that Gov. Bush’s tax reform plan would “unleash business investment” as the editors of the Wall Street Journal put it. Oh, I think there would be some business investment. I just don’t think it would be in the United States.
That’s one of the problems with our fiscal policy and monetary policy. Our economy doesn’t stand alone. We’re closely interconnected with other large economies and our trading partners, much more highly dependent on exports than we, are likely to react to any step we take.
The title of this post is a hat tip to the late Illinois Sen. Ev Dirksen who once wisecracked “A billion here, a billion there, and pretty soon you’re talking about real money.” That’s another problem we have. In a $17 trillion economy a few billion isn’t as much of the economy as it used to be. And even in its present depressed state the U. S. labor force today is about the size of the entire U. S. population in Dirksen’s time. That’s a real problem for politicians and a press corps that has no feel for the difference between a million and a billion let alone a trillion.
I wonder if these guys believe their own propaganda about dynamic scoring? It doesn’t take much effort to see that it hasn’t produced the results they claim with past tax cuts and there isn’t much reason to expect it to work now.