It will also add to the deficit. In many cases, lowering taxes can actually increase government revenues. If new businesses, new investments and new hiring are spurred by the prospects of better after-tax returns, the taxes paid by these new or growing businesses and employees can more than make up for the lower rates of taxation. But once again, because the tax deal is temporary, a large portion of this beneficent effect is missing. What some are calling a grand compromise is not grand at all, except in its price tag. The total package will cost nearly $1 trillion, resulting in substantial new borrowing at a time when we are already drowning in red ink.Let's think about this logically. Romney is arguing that the Obama/Republican compromise on the Bush tax cuts will not result in substantial growth in the economy. Or, that is, not enough growth to make up for the loss in revenue from the tax cuts.
Yet, the Bush tax cuts have been in effect since 2001. And there was so much growth in the economy the last nine years that the Bush tax cuts have more than paid for themselves. Right? Of course not. The Bush administration ended in debt, just like the Reagan administration.
If Romney wants the Bush tax cuts to be permanent (and I am not against that if...), then he ought to argue passionately for government reductions to offset the loss in revenue. Republicans need to end what George H.W. Bush rightfully called "voodoo economics." We can't just cut taxes and expect the growth in the economy to make up for our spending habits.