My reaction to last night’s policy debate was just published on nationalmemo.com.
Here’s the link:
I’ll be posting more on national memo soon.
The full text of today’s short article is after the break.
Mitt Romney’s Fuzzy Debate Math
Let’s take him at his word, and see how the numbers add up.
Today’s pop quiz in Presidential arithmetic:
If you have a $1.3 trillion annual deficit, and you are going to make it shrink to zero, how many new jobs will the economy have to create? Show your work.
If we start with Romney’s assertion that his policies will lead to twelve million new jobs over four years and give the government extra tax revenue, how close will that come to plugging the gaping hole in our annual budget? Not very close. If we assume that those jobs pay $40,000 per year and that each new job pays 20% in Federal taxes, the total additional revenue is just $96 billion in 2016.
That doesn’t come close to the $1 trillion currently projected deficit plus the $300 billion in additional spending Romney proposes for the military and insurance company subsidies he’s “returning” to Medicare.
Never mind that there’s a problem lowering the top tax rate to 28% from 35% will cost $250 billion in revenues, but plugging that hole by taking away the $165 billion in top earners’ deductions simply doesn’t work. Then there’s an even bigger problem making his tax cut of $5 trillion “revenue neutral” while giving the middle class “tax relief.”
But back to taking him at his word, even if it’s not worth the paper it isn’t printed on.
Let’s imagine those new jobs are really good jobs. How good do they have to be?
At a 25% Federal tax rate on all the new income, the average new job would have to pay a mere $433,333 per year to plug the gap. Sign me up for one of those new jobs, please.
Or maybe his policies will magically create more jobs than he’s assuming. If the new jobs were those $40K per year jobs each paying 20% in taxes, we’d need 162.5 million new jobs. For those playing along at home, that’s more jobs than the current civilian labor force, which stood at 154.6 million last month.
The bottom line?
Romney’s real word problem is that when he talks numbers, the numbers never add up.
Howard Hill is a retired investment banker who created a number of groundbreaking deal structures and analytic techniques on Wall Street, and later helped manage a $100 billion portfolio. He writes and blogs at mindonmoney.wordpress.com.