StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Most GOP Presidential Candidates Get An F On The Budget

29 Dec 2011
Posted by Stan Collender

I was interviewed by Sarah Eisen on Bloomberg Television this past Tuesday to give grades to the Republican presidential candidates on the budget. The full interview is here for what I hope will be your viewing pleasure. But we ran out of time before we could go through the full candidate list so here's a quick summary of my grades.

First, it's important to keep in mind that few candidates for any public office ever talk directly about the federal budget because there aren't too many voters who want to hear that their taxes will go up or that the services they get from the government will go down or be eliminated. Even when a candidate mentions specific policies, that discussion is almost always at a macro level that allows every voter to feel as if he or she will be protected.

Not only is that true in this case, but almost all of the GOP presidential candidates are currently talking about plans that would make the deficit and debt situation worse even though they're labeled as deficit reduction.

Second, as you'll see if you watch the interview, for comparison purposes I gave President Obama a C-. The administration still doesn't have a plan for dealing with the long-term deficit, but it does get credit for creating the Bowles-Simpson commission when the Senate failed to pass legislation that would have set up a congressional commission, for pushing House Speaker John Boehner (R-OH) to consider a "go-big" deficit reduction plan, and for being willing to compromise on budget -related when that was the only way to get something done.

As for my GOP presidential candidate grades...

Herman Cain:             Dropped the course

Jon Huntsman:          Incomplete: He just hasn't said much of anything on the budget

Mitt Romney:             D

Romney's says he will reduce spending to 20 percent of GDP by 2016, something that is likely to happen anyway if the economy picks up and current tax and spending laws stays in place. He's also talked about $500 billion in spending cuts without even hinting what they would be. He's also basing his estimates on a change in Medicare that is so unlikely to be adopted it has to be labeled fantasy.

Newt Gingrich:            F

This one is easy. According to the Tax Policy Center, Gingrich's tax plan would increase the deficit by $1.3 trillion in 2015 compared to what would occur under current law. To reduce the deficit, Gingrich relies on what he calls "deep" but completely unspecified spending cuts and higher economic growth.

Ron Paul                      F

This one is also easy. Paul says he wants to eliminate the income, estate and capital gains taxes. That would be fine if he also at least mentioned in passing that he'll also need to eliminate almost everything the federal government does to prevent the deficit and debt from rising. He doesn't.

Rick Perry                    F

Perry says he'll balance the federal budget by 2020, that is, by the end of his second term as president. In other words, without actually admitting it, Perry is saying that there will be seven years of federal deficits if he's elected. Perry also says he wants to cap overall federal spending at 18 percent of GDP without saying how he's going to get it to fall that far below the historical average of between 20 and 21 percent during a period when, because of the Baby Boomers retiring and higher interest on the national debt, it will be rising.

Michelle Bachmann   F

Bachmann doesn't have a deficit reduction plan unless you call refusing to raise the federal debt ceiling and increased Pentagon spending a way to reduce the deficit. Bachmann is committed to what she says will be "deep cuts in spending." She does not, of course, specify what they will be.

Rick Santorum           F

Santorum says he wants to cut $5 trillion in spending over five years. But other than ending federal spending on education, he doesn't say how. Santorum also doesn't say that $5 trillion would be a roughly 20 percent reduction in spending.

Trillions from

the Military Industrial Complex, from the $7800B the war industry has in their 10 year plan.

Start with not spending $250B to buy the F-35 and save $40B a year not futilely trying to keep it flying.

Then there is about $200B a year by reducing services contracts in DoD.

But that will affect the K St money machine.

Now do another on jobs

...or jobs plans. I imagine the results will be the same.

Deficit Math

Unless a candidate is willing to talk about raising taxes s/he is not telling us anything. Start by eliminating special treatment for capital gains and tax all income as ordinary income (compromise by downward adjusting capital gains by the GDP deflator over the holding period). That alone will increase the effective progressivity of the tax code.

Stipulate that payroll taxes must capture 100% of earned income while payouts cannot exceed the average income of a family of 4. That will protect Social Security and allow for a lower rate overall which will help the poorest.

Create a true single payer health insurance system that provides minimum basic coverage for all and let the private companies battle over "cadillac" add-on insurance.

Stop running off to war at the drop of a hat and definitely discontinue the use of expensive and less accountable mercenaries.

Do all that and watch those deficits disappear.

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