The Obama-Romney Debate and Geogaugy

Popular wisdom may say that Barack Obama lost the debate to Mitt Romney on eloquence, confidence and body language.  But looking at the text shows that he won hands down on what we like to call "geogaugy": numerical estimation of real-life quantities.  In this case, real-life money such as taxes and the federal deficit.

Here's one of the most striking exchanges between Obama and Romney; it's good to read it without taking into account Romney's well-studied body attitude, facial expression and vocal effects compared to Obama's in truth paler performance.

MR. ROMNEY: I will not, under any circumstances, raise taxes on middle-income families. I will lower taxes on middle-income families... let’s get to the bottom line. That is, I want to bring down rates. I want to bring down the rates down, at the same time lower deductions and exemptions and credits and so forth so we keep getting the revenue we need. 

Obama's response: 

PRESIDENT OBAMA: Now, Governor Romney’s proposal that he has been promoting for 18 months calls for a $5 trillion tax cut on top of $2 trillion of additional spending for our military. And he is saying that he is going to pay for it by closing loopholes and deductions.  The problem is that he’s been asked a — over a hundred times how you would close those deductions and loopholes and he hasn't been able to identify them.

Mr. Lehrer: All right.

PRESIDENT OBAMA: When you add up all the loopholes and deductions that upper income individuals can — are currently taking advantage of — if you take those all away — you don’t come close to paying for $5 trillion in tax cuts and $2 trillion in additional military spending.
 
BANG!  Shouldn't this be totally obvious?  Is Romney seriously fooling anyone? Loopholes are going to produce $7 trillion?

Romney tried to muddy the waters by claiming that he was not calling for a $5 trillion tax cut.

MR. ROMNEY: Let me - let me repeat - let me repeat what I said. I'm not in favor of a $5 trillion tax cut.  That's not my plan. My plan is not to put in place any tax cut that will add to the deficit. That's point one. So you may keep referring to it as a $5 trillion tax cut, but that's not my plan.

But this is foozling.  He certainly did propose a series of tax cuts that would add up to $5 trillion dollars over a period of about 10 years; his disclaimer does not concern the existence of the $5 trillion tax cut, but only the fact that it was not going to increase the budget deficit. What Obama said is correct. (Sadly, in spite of the cute little "never mind" comment, Obama did not take enough advantage of Romney's confusing these two issues and thereby denying his own proposed tax cuts.)

Kudos to President Obama for bringing meaning to those numbers by a little wise geogaugy.

PRESIDENT OBAMA: The fact is that if you are lowering the rates the way you describe, Governor, then it is not possible to come up with enough deductions and loopholes that only affect high-income individuals to avoid either raising the deficit or burdening the middle-class.  It's - it's math.  It's arithmetic. 

I would just say this to the American people. If you believe that we can cut taxes by $5 trillion and add $2 trillion in additional spending that the military is not asking for — $7 trillion, just to give you a sense, over 10 years that’s more than our entire defense budget — and you think that by closing loopholes and deductions for the well-to-do, somehow you will not end up picking up the tab, then Governor Romney's plan may work for you.

But I think math, common sense and our history shows us that's not a recipe for job growth. 
 
Let's see for a minute; this tax cut is supposed to cost $5 trillion, so what would that mean for individual middle-class wage earners?  Well, there are a roughly estimated 120 million households in the United States and a very roughly estimated half of them qualify as "middle-class".  Let's suppose that a normal middle-class household has two wage-earners in it, so we're talking about 120 million middle-class taxpayers in the United States.  Obviously, the tax cuts Romney is proposing are going to affect small businesses and not only households, but this is a rough estimation.  So if tax cuts for 120 million individual middle-class wage-earners are going to cost the government $5 trillion, that means that each individual would get a tax break of about $40,000 over the 10-year period under discussion.  So the tax cut would mean $4,000 dollars a year.  It's nice, but it's not life-changing.

As Obama says, it's very hard to imagine that closing loopholes that allow the rich to become richer is going to produce enough money to finance the $7 trillion expense.  But let's do Romney a favor, and suppose for a moment that it's true, or at least nearly true; maybe his tax cut will have to be a little more modest.  Then everything would be fine, right?

But wait - what about the $16 trillion U.S. budget deficit?  Isn't Romney also supposed to explain how he intends to find the money to balance that?

Well, here's how he does it: he explains that his tax cut for the middle class will create such economic stimulation that there will be millions of new jobs, and all of these newly employed people will pay taxes, thence providing the money to balance the budget!

MR. ROMNEY: My plan is not like anything that's been tried before. My plan is to bring down rates but also bring down deductions and exemptions and credits at the same time so the revenue stays in, but that we bring down rates to get more people working. My priority is putting people back to work in America...

 Mathematically there are - there are three ways that you can cut a deficit. One, of course, is to raise taxes. [OK but he's going to lower them instead.] Number two is to cut spending. [Right, cut spending on "Obamacare" and PBS, and close those loopholes, too.  Oh no, I forgot, that's just supposed to balance out the tax cut.] And number three is to grow the economy because if more people work in a growing economy, they're paying taxes and you can get the job done that way.

Get the rates down, lower deductions and exemptions to create more jobs, because there’s nothing better for getting us to a balanced budget than having more people working, earning more money, paying — (chuckles) — more taxes. That’s by far the most effective and efficient way to get this budget balanced.

Oh, okay.  Now, that makes sense: the tax cut will create jobs and these new working people will pay taxes and that will bring in lots of money to balance the budget. So let's see.  Unemployment in the U.S. right now is at over 20 million and I don't know how many millions of jobs Romney sees his tax cut of $3 or $4 thousand yearly actually creating, but let's be insanely optimistic and say his policies cut unemployment by a half, creating 10 million jobs.  

The 10 million newly employed people are all going to start paying taxes, which is great, because now in ten years these ten million people are going to pay for a $16 trillion deficit that the rest of the country's taxpayers' money is not sufficing to reduce.  That means that each of the 10 million newly employed people will be responsible for paying $1,600,000 worth of taxes to Romney's government in ten years - $160,000 a year each!  Bingo - problem solved!

Well, if Romney reduces unemployment to 0%, then each new employee only has to pay $80,000 of taxes a year....

Right.