Kyl: Tax Cuts are Free

Senator Jon Kyl (R-AZ) spells out the Republican view of tax cuts, unemployment insurance and the deficit as reported by Brian Buetler for Talking Points Memo.

The second highest ranking Republican in the Senate doubled down on a controversial statement he made this weekend, arguing in greater detail that tax cuts for wealthy people should never be offset by tax increases in other areas -- but that unemployment benefits need to be fully paid for by either spending cuts or tax increases. In so doing, he claimed candidly that the very existence of unemployment insurance is a "necessary evil," while tax cuts ought not be paid for by increases in order to make it easier to shrink the size of government.

The rationale, Kyl said, goes back to the fundamental conservative goal of shrinking the size of government. If tax cuts are offset by tax increases in other areas, then it's hard to drown government in a bathtub...Kyl dismissed the view of the Congressional Budget Office, and a large swath of economists, that during a recession, extending unemployment is one of the ripest forms of stimulus.

As Steve Benen points out on Washington Monthly:

But for all the talk about how desperate Republicans are to lower the deficit, when asked how the GOP would pay for $678 billion in tax cuts, Kyl said what he actually believed: he wouldn't pay for them at all. Spending requires budget offsets, tax cuts don't. Indeed, in Kyl's confused mind, one should "never" even try to pay for tax cuts.

It's quite a message to Americans: Republicans believe $30 billion for unemployment benefits don't even deserve a vote because the money would be added to the deficit, but Republicans also believe that adding the cost of $678 billion in tax cuts for the wealthy to the deficit is just fine.

This view seems consistent with GOP ideology (tax cuts grow the economy and pay for themselves) expressed by Bush administration political figures (but not budget officials) to justify their tax cuts. This claim was widely debunked in 2006.

While serious economists are divided on the question of whether and under what circumstances tax cuts are good for the economy, there is no such debate on the question of whether tax cuts pay for themselves. Economists from across the political spectrum reject the latter assertion...In the final analysis, the idea that tax cuts can spur sufficient economic growth to pay for themselves sounds too good to be true because it is too good to be true. In tax policy, as in other aspects of policymaking, there is no “free lunch.”

UPDATE: Former Reagan budget official Bruce Bartlett knocks this myth down with thorough documentation on Capital Gains and Games.

--Ballard Burgher