All you need to know about Romney: Budget Neutral Edition

Democrats have been hammering Romney on the point that is tax plan -- reducing marginal income tax rates, and making up the losses in revenue by closing loop-holes and deductions, in order to make the whole thing budget neutral -- as it will raise taxes on the middle as the lost revenue form upper-class tax cuts must come from someone's lost deduction. So now, according to Slate, Romney's campaign is essentially acknowledging reality by admitting they simply won't slash tax-rates as much. Yeglisias presents two alternative scenarios:

 "In Version 1, we do the full rate cuts and have no decrease in government revenues because we make up the difference with higher taxes on the middle class. This is the least politically palatable but the best long-term growth policy. In Version 2, we do what Ronald Reagan or George W. Bush would do and slash tax rates mostly without offsets. The result is a big increase in the budget deficit, which I think is the best short-term growth policy"

Got that? We increase the middle class tax burden -- at a time of middle class deleveraging, no less -- but decrease the upper-class tax burden, all the spur the broader American public to work harder! (perhaps my defense of Yeglisias came too soon). He supports the first plan apparently due to the incentive structure of marginal income taxes vs. deductibles. But, here, Yeglisias is laughably over-thinking himself. If incenting people to be productive is so good, why not just tax less and have a very large budget deficit? What will happen -- hyperinflation? If he thinks, he should specify. Also, to use his framework, the marginal extra dollar is worth more for those with a lower networth, complicating the picture. Not to beat a deadhorse -- but did I mention that it is middle-class deleveraging that is driving the balance sheet recession in the first place -- and Yeglias apparently wants to increase their tax burden, therby extending the horrible ordeal! Amazing.

On a related note, I recently heard an amusing anecdote about health IT stimulus funds being paused for nearly two years as appropriate software was being written and packaged to meet the lofty requirements of the ARRA, finally trickling out sometime in 2011. This just goes to show you: Krugman is wrong, higher G is too slow (and accumulates to government contractors, not exactly known for their efficiency, despite the mysterious appeal of "shovel ready projects"). Meanwhile wage-earners continue to see their savings depleted by taxes, with Medicare set to increase thanks to Obama's misguided ACA advisors (we must protect the solvency of Medicare!). I am not even going to venture into the Medicare debate, in which both parties are advocating rationing -- what you get when medical inflation increases faster than proposed Medicare inflation, a virtual certainty -- due to what appears to be a confused belief that Medicare is set to loose solvency....