“Im not defending Mittens, but the headline is a total distortion”
Not total, though misleading. Romney seems to be saying that thew government will still be taking money out of the economy via taxes while its cutting spenidng. Which is not to say that he’s ignorant of the relation between taxes and spending. That less spending removes the rationale for high taxation and puts downward pressure on rates. Only that he’s speaking to the lag between cuts and eventual growth. Because so long as the government continues to collect taxes which will not be pumped back into the economy through spending, however inefficiently, theoretically some capital will sit idly.
Romney underestimates the importance of spending beyond the tax yield, which comprises—what?—something verging on 10% of GDP. Cutting that would not leave idle tax revenue sitting around, and hence couldn’t negatively affect growth. He also seems all too willing to believe activity spurred by government spending constitutes something economically meaningful. But the MSM lives and dies by numbers, and whether the feds are digging up and filling in holes or inventing the internet, we pretend their spending is meaningful.
If hole digging numbers go down, people will say the economy’s slowing. They will blame the absence of the “multiplier effect” and “pump priming” of government spending. On that count, Romney’s point is taken. Though I can’t help but feel he’s wildly missing the mark. In what universe is it easier to slash spending than cut taxes? Why wouldn’t tax cuts follow spending cuts, once we’ve gotten over the spending cut hump? We’ve already had plenty of historic tax cuts. Spending cuts are the holy grail.
Hence, this is a phony problem.
You’ll appreciate this...
http://www.realclearpolitics.com/articles/2010/11/15/learning_from_japans_mistakes_107948.html