Romney Economic Policy Risks Simultaneous Deficit Explosion, Double Dip Recession

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.



My Response to “The Untruth Keeping You From Getting Rich”

Written in response to this Opinion Piece by Mr. Green.

Sorry to say it, Mr Green, but I believe what you’ve said isn’t entirely true. Certainly, individual initiative and personal responsibility are to be valued and uplifted. But these are not the only ideals a person should aspire to. Buried is the notion of civic and public responsibility, the notion that we are, not only responsible for ourselves, but we are responsible for each other.

It is a simple fact that many people are motivated primarily by personal gain. And, if pursued responsibly and without harm to others, such pursuit of happiness can very well be a virtue.

But there are others who are not firstly motivated by personal gain, but by a call to service, by a pursuit of knowledge, or by a simple need to care for others. These soldiers, first responders, teachers, scientists, medical personnel and even lawyers and politicians do not always achieve the level of wealth of a CEO or a major investor or of an owner of a corporation. Are these people to be scorned or pitied simply because they don’t involve themselves in a race for personal riches? Are they to be devalued? And what is their worth if it is not in the transient money of our world?

They are of intrinsic value to society due to their service. It is not their wealth that is their worth but the good of their work — to themselves and to us all. The individualist-centered ideology you describe ignores these people and their personal callings, boiling all value down to ‘wealth generation’ and ‘profit motive.’ But what of our satisfaction in good work? What of our satisfaction in creating a better tomorrow? This progress ethic is entirely overlooked. Indeed, it is even denigrated.

Your point of view generates unfairness because it is entirely centered in a competitive profit motive. And if this is the only ideal, people will do whatever they can — cheat, game the system — to win. This system rewards the vicious and the ruthless. It rewards cheaters. It rewards monopolies and cartels who establish dominance. Such a system, over time, will grow more and more unfair. We see this in action every time a pure free market is attempted. The system fails as too many people attempt to game the system. The most recent financial collapse is a case in point, the savings & loan crisis, the great depression. History shows there is no such thing as rational self interest. Self interest must be reigned in and tempered with rationality.

And as for fairness, the system now is dreadfully unfair. You have one class in control of ever greater power and wealth lobbying endlessly not only to increase that power but to reduce the share and enfranchisement of others. You have the wealthy investors who endlessly push to lower wages, angling more and more for a greater share of profits. At the same time, these individuals push to reduce their responsibility to the very society that has enabled them the opportunity to achieve so much. In doing so, they deny the opportunity of those who come after them.

Fairness is not a value to those with this world-view, helping others is not a value. Instead it is take what you can, when you can. This is not to say that all wealthy act in this way. In fact, there are many wealthy who are paragons of service and social responsibility, who should serve as examples for us all. Who call for greater responsibility from those of their station when it is needed (yes, that means sometimes paying higher taxes) and who also recognize the necessity of fair wages, living wages, and providing reward and care for a lifetime of virtuous work. These people are not the problem.

The problem comes from those with the ideology and belief that validates only greed. That does not recognize the need for service. And that does not consider for the needs of others or of the long-term progress of the society that afforded them the opportunity for such great success. And it is these takers that deserve every ounce of ire. They are as harmful and destructive as they are myopically self-serving. The new bandits and robber barons who never look beyond the shallow walls of their petty fiefdoms to see whom they have harmed.

This is not the American ideal, this shallow loot and pillage, this demonization of the government that is the very affirmation of our ability to cooperate and pool resources for endeavors far beyond the scope of a single man or a single lifetime. Some realize that a service to this cause, to this democracy, is a far, far better thing than a base service of animal desires. And it is the sight of this virtue that you have lost.

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