Despite the few details he leaked in the Denver debate — which contradict almost everything he and his campaign had said earlier, not to mention the GOP platform — Mitt Romney offers not much in the realm of a program to do better than President Obama in economics, in pulling the nation out of our economic doldrums. Nobel-winning economist Paul Krugman explains:
As many people have noticed, Mr. Romney’s five-point “economic plan” is very nearly substance-free. It vaguely suggests that he will pursue the same goals Republicans always pursue — weaker environmental protection, lower taxes on the wealthy. But it offers neither specifics nor any indication why returning to George W. Bush’s policies would cure a slump that began on Mr. Bush’s watch.
In his Boca Raton meeting with donors, however, Mr. Romney revealed his real plan, which is to rely on magic. “My own view is,” he declared, “if we win on November 6, there will be a great deal of optimism about the future of this country. We’ll see capital come back, and we’ll see — without actually doing anything — we’ll actually get a boost in the economy.”
Are you feeling reassured?
In fairness to Mr. Romney, his assertion that electing him would spontaneously spark an economic boom is consistent with his party’s current economic dogma. Republican leaders have long insisted that the main thing holding the economy back is the “uncertainty” created by President Obama’s statements — roughly speaking, that businesspeople aren’t investing because Mr. Obama has hurt their feelings. If you believe that, it makes sense to argue that changing presidents would, all by itself, cause an economic revival.
There is, however, no evidence supporting this dogma. Our protracted economic weakness isn’t a mystery; it’s what normally happens after a major financial crisis. Furthermore, business investment has actually recovered fairly strongly since the official recession ended. What’s holding us back is mainly the continued weakness of housing combined with a vast overhang of household debt, the legacy of the Bush-era housing bubble.
By the way, in saying that our prolonged slump was predictable, I’m not saying that it was necessary. We could and should have greatly reduced the pain by combining aggressive fiscal and monetary policies with effective relief for highly indebted homeowners; the fact that we didn’t reflects a combination of timidity on the part of both the Obama administration and the Federal Reserve, and scorched-earth opposition on the part of the G.O.P.
But Mr. Romney, as I said, isn’t offering anything substantive to fight the slump, just a reprise of the usual slogans. And he has denounced the Fed’s belated effort to step up to the plate.
Why do I disbelieve?
- For more than a year Romney’s been pushing tax cuts as a solution to everything. It’s rather late to back out of that now.
- Tax cuts can’t stimulate the economy — we tried them for 8 solid years, and they crashed the economy. One can make a great case that the Obama economy is not soaring because he agreed to extend the tax cuts, in return for getting about half of the stimulus we needed. At some point, people hurting in this economy will realize that they can’t benefit from a tax cut if they aren’t paying huge taxes, and they aren’t paying huge taxes if they are unemployed.
- Tax cuts cannot be revenue neutral. They hurt deficits. For months Romney’s been talking about defense spending and tax cuts that add between $5 trillion to $7 trillion in to the deficit. If he wishes to argue that deficits hurt, he’s in trouble. If Obama argues that deficits should be used to help people, Romney will be unable to make the math work on his plan if he tries to reply.
- Economic theory isn’t with Romney. Can he make that big of a snow job on voters? Even if he does, the economy won’t take it.
Now’s a good time to beef up on the high school economics most of us took, or the college class we took. Can you see any way to make an austere, Spain-style economy work in the U.S. without putting us into a death spiral?
- Economy in focus during debate showdown (cbsnews.com)
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- Debate fact check (salon.com)
- Romney opens debate: ‘Yes, we can help’ (nbcpolitics.nbcnews.com)
- Video: Romney fights Obama on $5 trillion tax cut (cbsnews.com)
- Paul Krugman: The Optimism Cure (economistsview.typepad.com)
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