Ethics &
Religion
March 17, 2016
Column #1,803
Kasich Beats Trump & Cruz on Deficit
By Mike McManus
Both Trump and Cruz propose huge tax cuts that would add $10 to $12
trillion to the deficit. By contrast, Kasich proposes to virtually
eliminate the federal deficit!
Fortune Magazine estimates that Donald Trump's proposed tax cuts "will
expand the federal deficit over the next decade by $10 trillion - on top
of the $10 trillion increase in the federal deficit already projected
under current law."
He proposes to reduce the top tax rate on individual income from 39.6%
to 25% and broadly reduce rates for everyone else. He would lower the
corporate tax rate from 35% to 15%. Yet he proposes no reductions in
federal spending to offset his tax cuts.
Fortune cites two non-partisan sources for this analysis. The Tax
Foundation estimates that the Trump plan would cut tax revenues by $12
trillion, but says the cuts might generate more jobs that would spark $2
trillion of added taxes. But that still adds $10 trillion to the
deficit. And the assumption of added jobs is also based on cuts in
federal spending equal to the tax cuts - that are not in Trump's plan.
The Tax Policy Center first estimated Trump's plan would add $9.5
trillion to the national debt, but increased that figure to $11.2
trillion when it learned the Trump plan had no cuts in federal spending.
Trump specifically stated he would not do anything to cut the growth of
Social Security and Medicare. Fortune stated, "If entitlement cuts are
out of bounds, then he would need to slash all discretionary federal
spending by 80%. This means debilitating cuts in defense budgets and key
domestic programs like education and research."
Ted Cruz proposes a flat 10% tax on everything - wages, capital gains,
dividends, etc. The corporate income tax would be abolished and replaced
with a 16% Business Flat Tax that applies to sales of goods and
services.
Those cuts "would add $12.5 trillion to the debt by 2026," according to
the Committee for a Responsible Federal Budget (CRFB). That estimate is
a middle range estimate, with some estimates lower and others much
higher.
"Assuming this cost, balancing the budget would require cutting spending
47% to 87%, or annual economic growth of 9%." This year's projected
growth is only 2%, less than a quarter of what would be needed. Cruz has
proposed federal spending cuts of $500 billion over the decade. CRFB
includes those cuts in estimating Cruz's plan costing $12.5 trillion.
Cruz has called for a "Balanced Budget Amendment," as has Trump. That
sounds good, but is ridiculous given their specific proposals.
By contrast, Gov. John Kasich, who did lead an effort as a Congressman
that wiped out the federal deficit in the 1970s - has proposed a plan to
nearly balance the federal budget by 2025. His plan includes reforming
the tax code and downsizing some federal programs.
CRFB called his plan "an encouraging commitment to deficit reduction."
For individuals he proposes to reduce tax brackets from seven to three,
with a top rate of 28%; to increase the Earned Income Tax Credit for low
wage earners by 10%, to reduce capital gains to 15%.
He also proposes to raise $1 trillion of revenue by reducing some tax
breaks (not including the charitable deduction and mortgage interest
deduction). But he does not specify which tax breaks are to go - for
individuals or corporations.
On the corporate side, he'd reduce the corporate tax rate from 35% to
25%, allow business to write off the cost of all purchases immediately
and double the R&E tax credit for small businesses.
He would reduce Medicare spending by about $525 billion through 2025,
but offers no specifics. He proposes capping Medicaid outlays, and
giving states a per-person allocation, and allow private insurers to
provide coverage. These block grants to states would save $265 billion.
He will lead a bipartisan process to make Social Security solvent. He
offers no specifics, but that could involve slowly raising the age for
retirement, having upper income earners pay higher taxes and reducing
cost-of-living adjustments.
Kasich would downsize other federal programs, such as directing federal
transportation funding to the states, leaving the federal government to
focus on safety and research. He would consolidate funding for education
and job training into a few block grants to states and localities.
CRFB concludes, "Gov. Kasich's plan is a good start and his commitment
to deficit reduction is a breath of fresh air in a campaign where tax
cuts and spending promises have dominated the conversation. We look
forward to seeing more details."
Amen. Kasich offers a refreshing contrast to Trump and Cruz.
_____________________________________________________
Copyright (c) 2016 Michael J. McManus, a syndicated columnist and past president of Marriage Savers. To see past columns go to
www.ethicsandreligion.com and his Search for any topic.
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