Tuesday contained two strangely contradictory economic policy pronouncements from Mitt Romney. In the morning he announced the formation of an economic advisory team that included some encouraging choices. The two economists on board are Glenn Hubbard, the dean of Columbia University’s business school, and Greg Mankiw, a professor at Harvard. Both served as chairs of George W. Bush’s Council of Economic Advisers. So, granted, they are hardly models of fiscal discipline. Hubbard pushed the irresponsible budget-busting Bush tax cuts over Treasury Secretary Paul O’Neil’s objections.
But Bushonomics looks quite sane compared to today’s GOP. These are relatively honest, albeit conservative, brokers. They are not the sort of people who demanded that Congress refuse to raise the debt ceiling, as Romney himself did. That’s not their only difference with their candidate. Romney recently said at the last Republican debate that he would not accept a deal to balance the budget that contained $10 in spending cuts for $1 in increased revenue. Both Mankiw and Hubbard endorses raising revenues through reducing expenditures in the tax code. Mankiw also supports taxing carbon emissions or raising the tax on gasoline.
Romney also appointed two politicians, former Representative Vin Weber (R-MN) and former Senator Jim Talent (R-MO). Webber is an establishmentarian who supports the Bowles-Simpson deficit reduction plan. That would raise $2 billion in revenues through eliminating expenditures in the tax code. No one knows what Talent thinks about revenues, but then again no one knows why Talent is on the committee either.
And yet by Tuesday afternoon Romney had dashed any liberal’s hopes that he would take a reasonable approach to economic policy. When he put out his long jobs plan, it contained the same conservative dogma that we heard from Jon Huntsman last week.
Romney would immediately cut domestic discretionary spending by 5 percent, which is a good way to kneecap the economic recovery and a bad way to reduce our long-term deficit. He would lower tax rates, sign free trade agreements and let domestic energy producers run amok over the environment. None would address our two major problems: a current high rate of unemployment and a long-term mismatch between projected spending and projected revenues. Indeed, by slashing revenues without offering serious plan to cut spending, Romney would exacerbate the latter problem. “It sounds like an effective plan to attack the problem that some workers are still getting paychecks,” says Dean Baker, co-director of the Center for Economic and Policy Research.
As for long-term growth, conservative ideology holds that lower tax rates, fewer environmental regulations and bilateral free trade agreements bolster growth. While they clearly increased inequality during the last three decades, the case that they aid growth is a lot shakier, considering that we’ve often enjoyed stronger growth during periods of higher tax rates. “There’s no reason or historical evidence to lead one to believe that’s a growth agenda,” says Jared Bernstein, Vice President Biden’s former chief economic adviser and a fellow at the Center on Budget and Policy Priorities.
Among the false premises of Romney’s plan is that increasing corporate profits after taxes, by cutting the corporate income tax rate, will spur hiring. Corporate profits are already quite high, but hiring has not kept pace with their growth. So Romney’s tax plan would do nothing to boost hiring. Romney also pledges to cap federal spending at 20 percent of GDP and endorses a balanced budget amendment. These absurd restrictions on federal spending would make us unable to react to future economic crises and would contract economic growth in the near term. “I doubt you could find an economist who would disagree with the assertion that such a move would send us right back into recession,” says Bernstein.
Romney has made spurring job growth the central promise of his campaign. But just like in Massachusetts and the private sector, as president he would actually do the opposite.