I watched supercommittee member Republican Sen. Jon Kyl’s appearance on Fox News Sunday, and I must say I was impressed by Chris Wallace’s interview, something I don’t often say of Mr. Wallace and certainly not of Fox “News.”

Wallace asked Kyl about the extension of the payroll tax cuts, which expire at the end of this year. But he asked him in the context of past Republican claims that tax cuts—like the Bush tax cuts—don’t need to be “paid for” because they pay for themselves, in terms of economic growth. That claim is a pillar of zany conservative economics.

Here’s how it went:

WALLACE: Senator Kyl, Republicans are demanding—and that’s the reason that the Democrats are putting up this millionaire surtax—are demanding that an extension of the payroll tax cuts, be paid for. But you haven’t done that in the past for the Bush tax cuts. And, one, I would like to know why the difference between paying for one and not paying for the other, and what do you think are the chances for a deal before the end of this year because it runs out at the end of this year to extend the payroll taxes.

KYL: Well, we have to deal with the unemployment insurance, with payroll taxes and a lot of other items before the end of the year. The problem here is that the payroll tax doesn’t go into general revenue, it supports Social Security. And you can’t keep extending the payroll tax holiday and have a secure Social Security. That’s the first problem.

The second problem is that by taxing the people who provide the jobs, you put off the day we have economic recovery and job creation in this country. And that’s precisely what the Democratic plan would do. It would hit those people, the small businesses who we all acknowledge are the ones who create the jobs coming out of economic difficulty.

And that we think would be a big mistake in –

(CROSSTALK)

WALLACE: If I may, Senator Kyl, just to cut this short, are you saying “no deal” on extending payroll tax cuts?

KYL: The payroll tax holiday has not stimulated job creation. We don’t think that is a good way to do it. Before the end of the year, we will have discussions about what we’re going to do on all these different programs.

After going to Sen. Dick Durbin for a response, Wallace comes back with this:

WALLACE: Let me if I can, Senator Kyl, I want to give you a chance to respond to that. I also want to ask you, if you will, briefly, to respond to this, because economists say there’s a real impact if you don’t extend payroll tax cuts and employment insurance. And let’s put it up on the screen:

They estimate—and again both of these run out January 1st—that failure to extend the payroll tax cuts and unemployment benefits will cut GDP growth 1 to 2 percent next year, and cost more than half a million jobs.

You say you question the stimulative effect of those. But according to these economists, there’s a real danger if Congress doesn’t extend both of those, that could throw the country back into a recession.

KYL: Chris, I don’t know who those economists are. I just read a piece by Art Laffer, who is a respected economist, who says that isn’t true.

Here’s the problem, when you are in a recession and you’re in difficult economic times as we are, and you need to put people back to work, as well as dealing with our deficit, how do you do that? You do it by enabling the economy to grow.

The best way to hurt economic growth is to impose more taxes on the people who do the hiring. And as a result, the Republicans have said, don’t raise the existing tax rates on those who do the hiring. Instead, I hope we can get into this, explore the kinds of things that we did during the deficit reduction committee work to reform the tax code, eliminate preferences, credits and deductions, or reduce their value significantly on the upper income taxpayers, so that they end up paying more, but not through a tax increase on the rates either on capital gains, dividends or upper marginal rates…

There are several things wrong with what Kyl says here (besides saying Arthur Laffer is a “respected economist“), but I want to address just two:

1) A large part of what is hindering the economic recovery is that there is a demand problem: ordinary folks aren’t spending enough to stimulate economic growth because they don’t have that much leftover to spend; the temporary payroll tax allows people in the working class to keep an extra $100 a month or so to spend in this demand-challenged economy.  The same with unemployment benefits, the stimulative effect of which is well-known. Wallace did a good job of countering Kyl’s assertions with what most economists believe: failure to extend the payroll tax cuts and unemployment benefits “will cut GDP growth 1 percent to 2 percent next year, and cost more than half million jobs.”

2) It’s fallacious to claim that the Democratic proposal of asking wealthy people to pay a tiny amount more on incomes over $1 million dollars will “hurt economic growth.” There is simply no evidence to support that and it defies common sense. Most small business owners do not earn enough to be subject to the tax proposed by Democrats and Jon Kyl knows that. As Politifact New Jersey pointed out,

Individuals with more than $1 million in income account for 2 percent of all business owners.

And:

If you drill down further, and look at just small business income, individuals with more than $1 million in income received between 14 percent and 18 percent of small business income and represent 1 percent of small business owners.

Further, as Jared Bernstein pointed out, contrary to most declarations you may have heard,

…small businesses, say those with 100 workers or less, account for a minority of both workers and payrolls, and are not the primary engine of job growth.

Here is the graph Bernstein posted showing the distribution of jobs and payroll across the business spectrum:

As you can see, while a majority (around 80%) of businesses are small (less than 100 workers), larger businesses employee 65% of the people and account for about 70% of the payroll (total compensation).

Finally, while Chris Wallace did do a good job on Sunday, he could have gone a little bit further.  He reminded Kyl:

You say you question the stimulative effect of those. But according to these economists, there’s a real danger if Congress doesn’t extend both of those, that could throw the country back into a recession.

What Wallace could have said is this:

You say you question the stimulative effect of those. But according to these economists, there’s a real danger if Congress doesn’t extend both of those, that could throw the country back into a recession. And isn’t that what you really want, Senator Kyl? A recession?  Isn’t that what your leader in the Senate, Mitch McConnell, really wants, as he continues his quest to make Obama a one-term president?

Okay, okay. I know that’s asking too much. We are talking about Fox.