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Sorting out the truth in state politics

PolitiFact: Maddow and Rubio duke it out over tax cuts and the deficit

Liberal MSNBC television host Rachel Maddow and conservative Republican U.S. Senate candidate Marco Rubio have been locked in a two-week tit-for-tat over tax cuts and the federal deficit — all set to a background of peppy elevator music, winks and clever one-liners.

Follow along:

July 14: Maddow uses her cable show to poke fun at Rubio's "12 Simple Ways to Grow Our Economy," saying things such as extending President George W. Bush's 2001 and 2003 tax cuts and repealing the estate tax fail to consider the GOP's and Rubio's other golden rule: Thou shall not increase the deficit.

July 16: The Rubio campaign for a Senate seat representing Florida reacts with a Web ad set to strange-sounding elevator music. "On Tuesday, Marco Rubio announced 12 simple ways to grow the economy and create jobs," the ad, called "Maddow," begins. "How can you know the plan is right? Rachel Maddow thinks it's wrong."

July 19: Maddow responds, creating her own "ad", mimicking Rubio's. "How does Marco Rubio say you can know his plan is right? 'Rachel Maddow thinks it's wrong.'

"Seriously. That's his argument. That's it," the ad continues. "Even if everything about me is inherently wrong just by virtue of who I am, this is still true about Marco Rubio: His economic proposals will add $3.5 trillion to the federal deficit."

July 21: Another response from Rubio. Same music. Same general point. (You can see the back-and-forth at PolitiFact.com.)

For Rubio, the exchange is no doubt a chance to take on a liberal media-type like Maddow. And we're pretty sure we haven't seen the last of it.

Still, we found it an appropriate time to jump in with a fact check. The question we're after: Will Rubio's economic ideas add $3.5 trillion to the federal deficit?

Maddow's case

A spokeswoman for Maddow said the talk show host got her deficit figures from the Congressional Budget Office, the nonpartisan number-crunching arm.

The CBO produced a series of revenue estimates in February should Congress enact three Republican-held tax cutting ideas: extend the 2001 and 2003 tax cuts that are set to expire; repeal the federal estate tax; and continue indexing the Alternative Minimum Tax for inflation so fewer people have to pay it.

All three proposals are part of Rubio's 12 ideas, specifically ideas 1, 3 and 5.

Together, the CBO found they would increase the federal deficit by $3.4 trillion from 2011-2020.

Preventing cap-and-trade legislation, Rubio's Idea 9, also would have a negative effect on the federal deficit, according to the CBO. In a letter dated July 7, CBO director Douglas W. Elmendorf said that opposing cap-and-trade legislation would have the effect of raising the federal deficit by about $19 billion from 2011-2020.

Many of Rubio's other ideas come with deficit impacts that are difficult to measure, or at least appear to have no impact on the deficit. Rubio proposes reducing the corporate tax rate, for instance, but he doesn't say how much — making it impossible to judge.

Still, the CBO verifies at least $3.4 trillion that will be added to the federal deficit between now and 2020 if Rubio's economic ideas are put in place.

Rubio's case

We asked economists and Rubio's campaign for an explanation.

Karen Campbell, a policy analyst at the conservative Heritage Foundation, said the CBO deficit projections do not account for a fundamental Republican philosophy: that lower taxes can bolster economic activity, lead to more investment, and in turn, to additional tax revenues.

It's a sentiment echoed by the Rubio campaign.

"A growing economy means more people are employed and generating revenue, more businesses are being started and expanded, and fewer people are claiming unemployment benefits," Rubio spokesman Alex Burgos said.

That's not an argument for everyone, however.

"I cannot see any way that extending the Bush tax cuts or repealing the estate tax could have any effect other than to produce an increase in the expected size of the future deficit. Period," said Gary Burtless, a senior fellow at the centrist-to-liberal Brookings Institution.

Bush's own top economic adviser, Greg Mankiw, estimated in 2005 that a broad-based income tax cut would recoup "only about a quarter of the lost revenue through supply-side growth effects."

Our ruling

We realize we're not going to be able to change people's basic economic philosophies. We're not here today trying to disprove supply-side economics, or boost another economic thought.

Based on our analysis, we do think it's a stretch for someone like Senate Minority Leader Mitch McConnell to suggest the Bush 2001 and 2003 tax cuts were revenue neutral. And yet we also see the logic in the argument that lower taxes could stimulate investment in the economy, creating an army of new taxpayers.

Rubio himself realizes spending cuts also will be necessary to offset at least some of the tax cuts he's proposed and to shrink the federal deficit. Rubio's campaign announced he would roll out ideas today in Jacksonville to cut government spending.

And we'll be ready to examine them.

But in this case, we're sticking to Maddow's claim that Rubio's "economic proposals will add $3.5 trillion to the federal deficit." The nonpartisan Congressional Budget Office says that extending the 2001 and 2003 Bush tax cuts, repealing the estate tax and continuing to adjust the Alternative Minimum Tax for inflation will increase the federal deficit $3.4 trillion between now and 2020.

That's right about on the mark, and measures the budget impact of only three of Rubio's tax-cutting ideas. But we do want to leave some leeway for the economic growth those broad-based tax reforms could generate, as well as Rubio's spending cuts, still to be revealed. We rate Maddow's statement Mostly True.

The statement

Marco Rubio's "economic proposals will add $3.5 trillion to the federal deficit."

Rachel Maddow on her MSNBC show, July 19, 2010

The ruling

The nonpartisan Congressional Budget Offices calculates that Rubio's tax cutting proposals will add at least $3.4 trillion to the federal deficit between now and 2020. But spending cuts and economic growth could shrink the overall impact. We rate the statement Mostly True.

PolitiFact: Maddow and Rubio duke it out over tax cuts and the deficit 07/25/10 [Last modified: Sunday, July 25, 2010 9:15pm]
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