Though it has been difficult to pin down Romney’s economic policies in the public arena, they remain readily available via his campaign website. And what Romney proposes creates severe risk of economic decline as bad or worse than that resulting from Bush’s failed economic policies.
His signature economic policy is what he terms as a ‘20% across the board’ tax cut. Digging into the numbers we find that families making over a million dollars per year gain an additional 175,000 dollars or more in income. In addition, according to Bloomberg, Romney’s policies result in far less benefit for the upper middle class (about 1500 dollars), almost no benefit for the middle class, and an actual increase in taxes for the lower middle class and poor.
As an economic stimulus measure, this policy is extraordinarily weak. It gives additional money to the wealthy who have a noted tendency to hoard wealth or to send it overseas. The result is that very little of this tax cut is likely to be spent increasing economic activity in the US economy and is much more likely to be sitting somewhere in a globalized blind trust. Since the benefits to the middle class are relatively small, any additional spending by reduced taxes will likely be off set by the destabilizing effect of expanding deficits.
And the total deficit expansion under such a cut is huge. About 5 trillion dollars over the course of ten years.
So Romney’s signature tax cut provides little overall benefit to the US economy while it creates an inevitable deficit expansion.
Romney’s second signature policy is to increase military spending by indexing it to 4% of GDP. This would elevate defense spending to 900 Billion dollars per year and result in a 2 trillion dollar increase to the federal deficit, further hampering the US’s long term economic outlook. And while such an increase in defense spending may be somewhat stimulative, it is no-where near as stimulative as direct spending by government on economic programs that have direct benefit to the economy. Programs such as research and development or seed funding like that which helped to double US alternative energy production under Obama proved far more effective at creating sustained American jobs and industries independent of government spending. The military, on the other hand, will always be dependent on government spending as it is a non self-supportive enterprise.
But the real risk comes from both Romney’s and the Republican party’s tendency to cut spending and incentive programs that benefit the middle class. As governor, Romney cut taxes while radically increasing fees and penalties. The net effect of this policy was to reduce taxes on the wealthy while increasing expenses for the middle and lower classes. Romney has hinted through his numerous ‘closing loopholes’ statement that such a shifting of the tax burden to middle class homeowners may well be in the works. Such a policy would have a negative overall effect on economic growth. In addition, both Romney and Ryan have show a tendency to push for reducing government programs that help the middle class. Ending funding to Planned Parenthood would have a severe negative economic consequence for many women. Cutting social services funding would harm many working Americans. Cutting, voucherizing, or block granting Medicare would harm middle class families. Cutting food stamps would harm the already poor, especially the working poor, many of who live in red states. Cutting government overall would remove access to a pool of good-paying jobs. Lowering or abolishing the minimum wage would harm household income. Continuing to enable tax incentives for shipping jobs overseas would harm the middle class. Abolishing Obamacare would do severe harm to many American families by drastically increasing both their medical expenses and their risk of medical bankruptcy.
Enacting any or all of these ideologically driven programs would have a net negative stimulus effect on the US economy and the risk is that even as irresponsible Romney fiscal policy explodes the deficit, ideologically driven ‘anti-government’ policies targeting programs that help the middle class would result in both poor and middle class families spending less and deflating the US economy. The result would be a combined deficit explosion and double dip recession that could lead to Depression. A potential Romney depression to follow the Bush great recession.
That’s the risk of returning to trickle down, voodoo economics. Something we can avoid by re-electing the President who got us out of Bush’s mess in the first place.