Mitt Romney’s Fuzzy Debate Math

[John_Stamos_Left_Ear]

The person who wrote this Blog post is Howard Hill is a retired investment banker. Presumably the guy knows numbers. Maybe someone here can check his work - I’m no mathematician, and I didn’t even stay at a Holiday Inn Express last night…

Mitt Romney’s Fuzzy Debate Math

Let’s take Mitt Romney at his word, and see how the numbers he cited during Wednesday night’s debate add up. We can begin with a pop quiz in Presidential arithmetic:

If you have a $1.3 trillion annual deficit, and you are going to make it shrink to zero without raising any tax, how many new jobs will the economy have to create? Show your work.

Starting with Romney’s assertion that his policies will lead to 12 million new jobs over four years and provide the government with fresh tax revenue, how close will that come to plugging the gaping hole in the federal budget? Answer: Not very close.

If we assume that those jobs pay $40,000 per year and that each new job pays 20 percent in Federal taxes, the total additional revenue comes to just $96 billion in 2016.

That $96 billion obviously doesn’t come close to the $1 trillion currently projected deficit — not to mention the $300 billion in additional spending Romney proposes for the military and the insurance company subsidies he’s “returning” to Medicare.

Never mind that there’s a problem lowering the top tax rate to 28 percent from 35 percent, which will cost $250 billion in revenues. Plugging that hole by taking away the $165 billion in deductions used by top earners simply doesn’t work. Then there’s an even bigger problem making his tax cut of $5 trillion “revenue neutral” while giving the middle class “tax relief.”

But let’s continue taking Romney at his word… Let’s imagine those new jobs are really, really good jobs. How good do they have to be to provide enough new tax revenue to cover the deficit?

At a 25 percent Federal tax rate on all the new income, the average new job would have to pay a mere $433,333 per year to fill the gap. Sign me up for one of those new jobs, please.

The other possibility is that Romney’s policies will magically create even more jobs than he’s assuming. If the new jobs were those $40K per year jobs each paying 20 percent in taxes, we’d need 162.5 million new jobs. For those playing along at home, that’s more jobs than the total current civilian labor force, which stood at 154.6 million last month.

The National Memo

If this is all correct, According to Mitt Romney’s own assertions at the debate, his 12 million new jobs will have to make over $430,000 a year or he has to create more jobs than we currently have in the work force.

If this is incorrect, how many jobs must he create or how much do the 12 million new jobs need to pay? If it is correct, how do Romney supporters feel about this?

[elucidator]

Math. Not even once.

[bengangmo]

You asked me for the math John,

So here it is.

But just to make sure we are on the same page a few qualifications.
a) We are talking about across 10 years here right?
b) A trillion has 12 zeros
c) I am not a mathemitician, not an american, and I’m an Obama supporter anyway, so I’m not gonna invest a lot into this

Based on trying to raise $1.5 trillion across 10 years from existing workforce (156 million), assuming an annual tax rate of 20% you would need to raise the annual income of each current worker by $5,000 per year.

If you take away the income from the 12 million new jobs, it comes down to about $4,500 per worker.

Do I think it will happen? NO - on the other hand though, it’s not quite so egregarious as is being made out.

[Terr]

The 12 million new jobs, if they happen, do not exist in a vacuum. They add to the economy. People in those jobs produce more stuff. That stuff gets sold - either here or exported. In either case, the effect is way beyond just the wages for the jobs and the taxes on those salaries.

Look at it another way - in 2007-2009, something like 7.5 million jobs were lost. According to the simplistic analysis of the guy quoted in the OP, that would only lead to the shortfall of what - 50-60B/year? Is that what you think happened?