October 12, 2007
New York Times
Editorial

What, Me Worry?

If anybody had a doubt about Republicans' detachment from the economic reality of most Americans, Fred Thompson, the former United States senator, set them straight as he opened Tuesday's Republican presidential debate: the economy, he declared, "is rosy."

He wasn't the only one in rose-colored denial or out of touch. Despite entreaties from their hosts, all the leading Republican candidates neatly overlooked Americans' fear of recession and the fallout from the meltdown in the housing market.

Watching the debate, it felt as if these candidates, or at least the front-runners, were living in an alternate universe. It's one where nothing but taxes can stop the ever upward growth of the American economy and where a problem hasn't been invented - millions of uninsured, America's dependency on Middle Eastern oil - that can't be dealt with through tax cuts, slashing government spending and regular, stiff doses of deregulation.

Forget a carbon tax or a cap-and-trade regime for carbon emissions - not that anybody mentioned global warming as a big problem. Forget expensive incentives to develop alternative energy sources. With everybody calling for lower taxes, Republicans were left with no way to address any problem except exhorting the private industry to show its resourcefulness.

The best brawl was over who had done more harm to his constituents: Rudolph Giuliani, who according to Mitt Romney increased spending by 2.8 percent a year when he was mayor of New York City, or Mr. Romney, who according to Mr. Giuliani raised taxes by 11 percent per capita when he was governor of Massachusetts.

All this bowing before the tax-slashing idol could be understood as a matter of political survival. But the economic arguments are nonsense, none more so than the claim - trumpeted by Mr. Giuliani and a revered tenet of his party - that lower tax rates will inevitably generate more tax revenues. That theory has been tested and failed, leading to enormous deficits during the administrations of Ronald Reagan and George W. Bush.

Two years ago, the Congressional Budget Office published an analysis of the effect of a tax cut on economic growth and tax revenues. It found that even under the rosiest of assumptions, cutting taxes led, inevitably, to lower revenues and a bigger deficit. But perhaps those assumptions were not rosy enough for the Republican presidential candidates.

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