Tax-Cut Crusader Varney Supports The Wrong Tax Cuts
On the December 21 edition of Fox News' Fox & Friends, Fox Business host Stuart Varney, who has repeatedly promoted tax cuts for the wealthy, claimed he was "not so sure" a year-long extension of the payroll tax cut would create jobs. In fact, economists agree that an extension of the payroll tax cut would boost employment and help the economy, while the cuts supported by Varney would not have a positive impact on revenues or the economy.
Varney Suggests The Payroll Tax Extension Would Not Create Jobs
Varney: "Does [An Extension Of The Payroll Tax] Create Jobs?" During the December 21 broadcast of Fox News' Fox & Friends, Fox Business host Stuart Varney questioned the idea that a year extension of the payroll tax cut creates jobs, ultimately concluding he "[wasn't] so sure." From the broadcast:
STEVE DOOCY (co-host): What we've got here is a big difference of opinion. Stuart Varney joins us right now live. It's very clear they're both standing their ground.
VARNEY: Wait a second, that's all politics.
GRETCHEN CARLSON (co-host): Yes, of course.
VARNEY: If you just put politics completely aside just for one moment, OK, and it's very hard to do. Put the politics aside and look at this policy. Is this a good policy for the American people? Is this good for the economy? Does it create jobs?
DOOCY: The two month payroll tax cut.
CARLSON: Thank you. Thank you for finally asking that question!
VARNEY: OK. Here's the question. If you extend the payroll tax holiday and you increase jobless benefits, that costs a quarter of a trillion dollars. OK? No politics here. That's just pure money. A quarter of a trillion dollars.
DOOCY: Taken from where? Social Security.
VARNEY: Taken from mostly Social Security and the general fund of tax revenue. You partly pay for this with? A tax. A fee on mortgages and refi[nancing]. Is this good policy?
DOOCY: You know what I am wondering--
VARNEY: Costs a quarter trillion. Do you create new jobs and you pay for it by taxing mortgages? I'm not so sure.
BRIAN KILMEADE (co-host): You have an interesting -- that's one part of the debate is does it even work? Do we need it? I guess most of Congress does because everybody agrees in Congress that we need it.
VARNEY: The payroll tax holiday extension essentially removes about $110 billion next year from the Social Security Trust Fund. It takes -- from Social Security revenues, that's what I should say. $110 Billion taken away from Social Security. Is that good for Social Security? Is that good for retirees? Is that good for the AARP? Where are they? Good question, I don't know.
CARLSON: And it flies in the face of the entire debate that we've been having for the last year about our national debt.
CARLSON: I mean, we're just talking about how do we try to cut billions of dollars because our debt has reached 15 trillion and now, this is pure politics in my mind. This is why both sides are calling for what I believe to be the new normal where people aren't going to pay payroll tax. They're just not going to pay it. Like high gas prices. New normal. [Fox News Channel, Fox & Friends, 12/21/11]
In Fact, Economists Agree, An Extension Of The Payroll Tax Cut Would Boost Employment And The Economy
Frank: "Perhaps The Most Promising" Policy To Reduce Unemployment "Is A Payroll Tax Holiday." In a June 25 New York Times op-ed, Robert Frank, economics professor at Cornell University, wrote:
If the economy could generate jobs at the median wage for even half of these people, national income would grow by more than 10 times the total interest cost of the 2011 deficit (which was less than $40 billion). So anyone who says that reducing the deficit is more urgent than reducing unemployment is saying, in effect, that we should burn hundreds of billions of dollars worth of goods and services in a national bonfire.
We ought to be tackling both problems at once. But in today's fractious political climate, many promising dual-purpose remedies -- like infrastructure investments that would generate large and rapid returns -- are called unthinkable, in the false belief that they would impoverish our grandchildren. Yet there are other ways to attack unemployment that could garner bipartisan support.
Perhaps the most promising is a payroll tax holiday. The payroll tax was originally meant to pay for Social Security, and in recent years, employees and employers have each contributed 6.2 percent of total salary -- with no additional levies on salaries beyond $106,800. Congress should both declare an immediate payroll tax holiday for employees and exempt employers from making contributions for newly hired workers -- and keep both provisions in effect until the end of next year. [The New York Times, 6/25/11 ]
Seidman: "To Boost Private Sector Spending And Jobs," Congress Should Implement An "Immediate Suspension Of The Entire Employee Payroll Tax." In a July 17 op-ed in Delaware's News Journal, University of Delaware economics professor Laurence Seidman wrote:
To boost private sector spending and jobs, any budget deal negotiated by the president and Congress should contain an immediate suspension of the entire employee payroll tax through 2012.
Why? Because leaving more money in people's paychecks will cause them to spend more, and in response to their spending, private sector employers will expand production and create private sector jobs. Without this stimulus to the private sector, the economy is likely to fall back into a deep recession.
According to the simulations, if the suspension begins promptly, then in the fourth quarter of 2012 the unemployment rate would be 1 percentage point lower than it would have been without the temporary employee payroll tax suspension. [News Journal, 7/17/11, accessed via Nexis]
Tyson: Jobs Plan Should Include "At The Very Least" An Extension Of "The Temporary Payroll Tax Cut For Employees." In a September 6 post on the New York Times' Room for Debate blog, University of California, Berkeley professor and former Council of Economic Advisers chairwoman Laura Tyson wrote:
The labor market is suffering from two problems: first, an immediate jobs gap, primarily the result of the collapse in demand after the 2008 financial crisis, and second, a long-term gap in rewarding jobs for American workers, primarily the result of skill-biased technological change and global competition.
The jobs gap requires additional fiscal measures to increase private spending and promote job creation. At the very least, the temporary payroll tax cut for employees enacted at the end of 2010 should be extended and a temporary payroll tax cut for employers that increase their payrolls or a tax credit for new hires should be introduced. [The New York Times, 9/6/11 ]
For more on the benefits of an extension of the payroll tax cut SEE HERE .
Varney Has A History Of Promoting Tax Cuts For The Wealthy, Claiming They Raise Revenue
Varney: "How Do You Grow The Economy? In My Opinion, Tax Reform. Lower Rates, Fewer Deductions, More Revenue To The Treasury." During the November 22 broadcast of Fox News' Fox & Friends, Varney claimed lower tax rates lead to more revenue. From the broadcast:
KILMEADE: So, let's talk about the downgrade. I'm only kidding. Let's do this. How about this: The New York Times postulates that maybe this is going to work out good because in 2013, the Bush tax cuts go away, and the 1.2 trillion in cuts, it'll get us on the negative term when it comes to the deficit, and a lot of people don't really care that much about defense, and they're willing to take these cuts and this increase in taxes.
VARNEY: If you think that the way to tackle our debt problem is to raise taxes and cut the military, OK, I suppose this is a good thing. If you think that that will have a good outcome for our debt and our economy, yeah, OK, The Times has a point. I think the exact opposite. The way to fix the debt problem is not with higher taxes and cutting the military, it's to grow the economy. How do you grow the economy? In my opinion, tax reform. Lower rates, fewer deductions, more revenue to the Treasury. Better economy. [Fox News, Fox & Friends, 11/22/11 , via Media Matters]
Varney: "History Shows That You Get More Money To The Treasury By Lowering Tax Rates Than By Raising Tax Rates." From the June 17 edition of Fox News' Fox & Friends:
VARNEY: When you tax at 70 percent -- if you go back to the Carter years, and so that people who are supposedly wealthy lose 70 cents on every dollar they make above a certain level -- you do that and, you actually take in less money in total taxes than if you have the rate all the way down at 35 percent, where it is now.
In other words, the academic left, like Robert Reich, they want to get back to the Carter years -- very high tax rates on the rich -- because they want to -- they think they are going to pull in a ton of money to pay for Medicare and Medicaid and social services. They are wrong. History shows that you get more money to the Treasury by lowering tax rates than by raising tax rates.
GRETCHEN CARLSON (co-host): How? I mean, because on its face, you would think, well, how does that happen?
VARNEY: Because lower tax rates -- the money comes out of the woodwork. The rich stop hiding it all over the place; they stop sending it overseas. They're quite prepared to pay 28 percent or 30 percent or whatever it is. They're prepared to pay that low rate. And that stimulates the economy, so the economy grows, and tax revenues grow as the economy grows. That's the basic math here. [Fox News, Fox & Friends, 6/17/11 , via Media Matters]
Varney: "Historically...When You Lower Rates On The Rich, You Actually Bring More Money To The Treasury." From the August 3, 2010, edition of Fox News' Fox & Friends:
VARNEY: Historically, it shows that when you raise [tax] rates, you actually bring in over the long term less money to the Treasury and the reverse is true as well. When you lower rates on the rich, you actually bring in more money to the treasury. What President Obama is doing, he's playing politics. I hate to say playing politics but this is a political issue. The very core of President Obama's administration is raise taxes on the rich, redistribute the wealth. That's what's -- that's what he's all about on January 1. Not economics. It's politics. [Fox News, Fox & Friends, 8/3/10 , via Media Matters]
Varney: Tax Cuts Caused "A Gigantic Increase In Revenues To The Federal Treasury." From the July 27, 2010 edition of Fox News' The O'Reilly Factor:
VARNEY: The United States economy took off after Newt Gingrich swept Congress, the House of Representatives and the Senate in 1994 and the economy was certain of a cap on spending. It was at that point that we achieved enormous rates of growth, after the Republicans in 1994.
If you really want to go back and be historically accurate, look at the tax cuts under John F. Kennedy, under Ronald Reagan and George W. Bush. They cut tax rates, and very soon after, there was a gigantic increase in revenues to the federal treasury, reducing deficits. That's historically accurate. [Fox News, The O'Reilly Factor, 7/27/10 , via Media Matters]
In Fact, Economists -- Including Bush Advisers -- Reject Claim That Tax Cuts In The Past Have Increased Revenue
EPI: Bush Tax Cuts "Added $2.6 Trillion To The Public Debt Over 2001-10." In a September 26 article, Andrew Fieldhouse of the Economic Policy Institute (EPI) wrote:
A spending-cuts-only approach is regressive in that it forces the brunt of deficit reduction on the backs of poor and working families while ignoring a prime culprit of the budget deficit: the expensive, ineffective, and unfair Bush-era tax cuts. These top-heavy tax cuts added $2.6 trillion to the public debt over 2001-10 and will add $3.8 trillion to deficits over the next decade if fully continued. [EPI, 9/26/11 ]
Bartlett: Revenue Has Been Historically Low Because "Taxes Were Cut In 2001, 2002, 2003, 2004 and 2006." In a July 26 New York Times blog post, Bruce Bartlett, former policy adviser to Presidents Ronald Reagan and George H.W. Bush, wrote:
In a previous post, I noted that federal taxes as a share of gross domestic product were at their lowest level in generations. The Congressional Budget Office expects revenue to be just 14.8 percent of G.D.P. this year; the last year it was lower was 1950, when revenue amounted to 14.4 percent of G.D.P.
But revenue has been below 15 percent of G.D.P. since 2009, and the last time we had three years in a row when revenue as a share of G.D.P. was that low was 1941 to 1943.
Revenue has averaged 18 percent of G.D.P. since 1970 and a little more than that in the postwar era. At a similar stage in previous business cycles, two years past the trough, revenue was considerably higher: 18 percent of G.D.P. in 1977 after the 1973-75 recession; 17.3 percent of G.D.P. in 1984 after the 1981-82 recession, and 17.5 percent of G.D.P. in 1993 after the 1990-91 recession. Revenue was markedly lower, however, at this point after the 2001 recession and was just 16.2 percent of G.D.P. in 2003.
The reason, of course, is that taxes were cut in 2001, 2002, 2003, 2004 and 2006.
According to a recent C.B.O. report, they reduced revenue by at least $2.9 trillion below what it otherwise would have been between 2001 and 2011. Slower-than-expected growth reduced revenue by another $3.5 trillion. [The New York Times, 7/26/11 ]
Krugman: After Reagan's 1981 Tax Cuts, "Revenues Are Permanently Reduced Relative To What They Would Otherwise Have Been." In a July 2010, post on his New York Times blog, Nobel Prize-winning economist Paul Krugman wrote that "the revenue track under Reagan looks a lot like the track under Bush: a drop in revenues, then a resumption of growth, but no return to the previous trend." He added, "This is exactly what you would expect to see if supply-side economics were just plain wrong: revenues are permanently reduced relative to what they would otherwise have been." [The New York Times, 7/15/10 ]
Bush CEA Chair Mankiw: Claim That Broad-Based Income Tax Cuts Increase Revenue Is Not "Credible." Economist Greg Mankiw, who also served as chair of the Bush Council of Economic Advisers (CEA), wrote on his blog on July 2, 2007:
I used the phrase "charlatans and cranks" in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don't.
My other work has remained consistent with this view. In a paper on dynamic scoring, written while I was working at the White House, Matthew Weinzierl and I estimated that a broad-based income tax cut (applying to both capital and labor income) would recoup only about a quarter of the lost revenue through supply-side growth effects. For a cut in capital income taxes, the feedback is larger--about 50 percent--but still well under 100 percent. A chapter on dynamic scoring in the 2004 Economic Report of the President says about the the [sic] same thing. [Greg Mankiw, 7/2/07 ]
Former Bush Economic Adviser Samwick: "Tax Cuts Have Not Fueled Record Revenues." In a January 2007 blog post titled "New Year's Plea," Andrew Samwick, former chief economist for George W. Bush's Council on Economic Advisers, wrote:
You [in the Bush administration] are smart people. You know that the tax cuts have not fueled record revenues. You know what it takes to establish causality. You know that the first order effect of cutting taxes is to lower tax revenues. We all agree that the ultimate reduction in tax revenues can be less than this first order effect, because lower tax rates encourage greater economic activity and thus expand the tax base. No thoughtful person believes that this possible offset more than compensated for the first effect for these tax cuts. Not a single one. [Vox Baby, 1/3/07 ]
Varney Also Attacked The Earned Income Tax Credit, Another Tax Policy Designed To Benefit Low- And Middle-Class Workers
Varney On The Earned Income Tax Credit (EITC): It's A "Cash Welfare Scheme." From the June 15 edition of Fox News' Fox & Friends:
VARNEY: Whenever you've got a cash welfare system you are going to have people gaming that system. What you have not got on the screen is the Earned Income Tax Credit, which is by far the biggest cash -- I'm going to call it a welfare scheme. That is known as the most corrupt government program. Billions of your dollars going out there when they should not be going out there; same with the Supplemental Security Income program. It really is a scandal. At a point where we are running out of money, running a massive deficit, and Social Security itself is in trouble. [Fox News, Fox & Friends, 7/15/11 , via Media Matters]
Varney: EITC "A Form Of Welfare, Income Redistribution." During the May 19 edition of Fox Business' Varney & Co., Varney claimed that along other social programs like food stamps, unemployment insurance and Medicaid, the EITC was "a form of income welfare redistribution." [Fox Business, Varney & Co., 5/19/11 , via Media Matters]
- In fact, According To The Non-Partisan Brookings Institute "The EITC Has Proved To Be Remarkably Successful In Reducing Poverty. In a February 2006 report titled "The Earned Income Tax Credit At Age 30: What We Know," Brookings researcher Steve Holt asserted, "the Earned Income Tax Credit (EITC) has become a robust and largely successful component of American labor and antipoverty policy." Additionally, Holt asserted:
The EITC has proved remarkably successful in reducing poverty. In 2003, the EITC lifted 4.4 million people in low-income, working families out of poverty, more than one-half of them children. Today, the EITC lifts more children out of poverty than any other social program or category of programs. Without it, the poverty rate among children would be 25 percent higher (Greenstein 2005). The Council of Economic Advisers (1998) found that more than one-half of the decline in child poverty between 1993 and 1997 could be explained by changes in taxes, and most important was the EITC. Another study found that from 1995 through 1999, the EITC reduced the overall poverty rate by 1.5 percentage points, even though only about one-third of poor households qualify for the credit (Hoffman and Seidman 2003). The total poverty gap -- the aggregate difference between poor families' resources and the poverty threshold -- for families with children would have been 20 percent higher in 1999 without the EITC (Ziliak 2004).[Brookings Institute, February 2006 ]
For More On Varney's Partisan Economic Analysis SEE HERE .