Mitt Romney has offered a 58-page treatise of his economic proposals for America, should he gain the presidency. Many of the points have an impact on the economy in terms of their fiscal policy and the financial implications for Americans and the business community. To place this in context, if one were to assay his economic strategy in terms of the other candidates, it would be evolutionary rather than revolutionary and minimalist rather than dramatic.
The Romney economic approach relies more on standard Republican conventional philosophy rather than bold steps. To view it in “Reaganesque” terms, Romney is proposing pastels rather than primary colors. Compared to what President Obama has advocated over the past three years, however, Mitt Romney certainly still embodies a significant departure from the president’s progressive economic stance.
The following is an analytical distillation of where Romney stands fiscally, and what his economic initiatives are.
First, Romney has stated that on day one of his presidency, he would demand anywhere from 5 to 10 immediate actions or pieces of legislation that would be passed or undertaken.
The American Competitiveness Act
The Competitiveness Act would reduce the corporate income tax burden dropping from 35% to 25%. He would also attempt to reorganize the corporate income tax structure, as well. Among his proposals would also be to encourage multinational corporations that have moved some of their operations overseas to relocate those back into the U.S., presumably with no negative financial repercussions.
Open Markets Act/Treaty
This potential agreement would frame a free-trade treaty with Colombia, Panama, and South Korea. Obviously, they would need to be mutually beneficial to both the U.S. and the members of the treaty.
Romney’s Down-Payment on Fiscal Sanity Initiative
This plan is intended to lower non-security discretionary spending by 5 percent and reduce the federal budget by $20 billion. This would amount to roughly 4/5 of 1 percent of the budget at current levels — hardly revolutionary. Further, his fiscal policy calls for capping federal spending at 20% of GDP. This would be a rather drastic cut.
Mitt Romney’s Economic Positions
- Taxes: Romney would have the tax system redesigned in a way that would result in no change to individual income tax rates. However, part of his plan also includes the elimination of taxes on (personal) interest & dividends, the elimination of capital gains for low and middle-income taxpayers, and the elimination of the estate tax. These would cover taxpayers earning less than $200,000 per year.
- Cut, Cap and Balance: Mitt Romney supports the basic Holy Grail of cutting federal spending; capping at a fixed per cent of GDP, per above and balancing the budget with a “Balanced Budget” constitutional amendment. While this actually makes economic sense, it is unlikely to garner enough support – it would require agreement from ¾ of all states. A Balanced Budget Amendment also weakens the spending authority of Congress, as well as the states that might benefit from federal spending, in general, which will be difficult to pass through Congress.
- Obamacare: Mitt Romney has pointed out that state sponsored or mandated health care is a better fit for the country than an oppressive federal health insurance mandate. This certainly may play out to his advantage, if the Supreme Court overturns key portions of President Obama’s health care plan. From an economic point of view, the repeal of Obama’s plan will cut federal spending from between $100 billion and $200 billion per year (depending upon whose forecast is to be believed). This alone will free up needed capital for the economy, as money spent in the private sector is typically more effective for economic development than funds taxed and then released by the federal government. The repeal of Obama’s health care plan is still not a total win for the Romney camp, because the Massachusetts health care program (enacted while Mitt Romney was governor of the state) was used as the model by those crafting the federal health care legislation. He has to explain convincingly why a state mandate for health insurance is better for the nation than no mandate at all.
- Tort Reform: Mitt has pushed for tort reform, with its wide ranging economic benefits, when he stated, “Preventing excessive damage awards, limiting class-action lawsuits to those situations where they are actually warranted, and empowering judges to sanction more effectively trial lawyers and parties who bring frivolous claims [will prevent] spurious litigation from inhibiting investment and job creation.” This is probably true.
With his business acumen and gubernatorial background, Mitt Romney likes to be portrayed as the presidential candidate best equipped to steer the nation at a time of economic crisis. His ideas range from regulations to taxation:
- Regulations: Romney has promised to, “…cut out any regulation that would unduly burden the economy or job creation.” His approach to regulatory reform is based upon two very key concepts: first, he intends to “impose a regulatory cap” such that “the rate at which agencies could impose new regulations would be capped at zero.” Second, agencies will have to go through a budgetary-like process and identify offsetting cost reductions from the existing regulatory burden. All of these are really more evolutionary steps that a conservative business manager might pursue.
- Jobs: Romney has stated he would be able to create 11 million jobs in the first 4 years of his presidency. This would require many things to go right, and assumes a 4% rate of growth in the economy. While this is possible, and not outside the farther realms of probability, it still presents a sizeable obstacle because of the many uncontrollable factors in play: real estate price decline, a further-weakening dollar, oil price instability, and the unknown effects of the so-called “Arab Spring”. When all is said and done, Romney probably considers himself to be a safe choice for America.
The Conventional “Safe” Approach to the Presidential Nomination
There is still a crisis of confidence in government at all levels, but particularly the federal government. The Wall Street protests, while losing steam in New York, seems to be metastasizing into other cities and into other countries, as well. This, in the short run, does not bode well for Romney and others with conventional approaches to governance, but may favor bold initiatives such as Herman Cain’s 999 plan, or Newt Gingrich’s 21st Century Contract With America.
However, as the protests become increasingly violent and extreme, citizens may opt for more conventional candidates. For Romney, who has been rock steady in the debate cycle, this may work to his electoral advantage.
Roy, A. On Health Care, Mitt Romney’s Pragmatic Plan Plays it Safe. Forbes. November, 2011. Accessed November 19, 2011.
Turnball, M. Mitt Romney jobs plan: Can it create 11 million jobs in four years?. Christina Science Monitor. September, 2011. Accessed November 19, 2011.
Mitt R0mney Speech, Las Vegas, NVFact Sheet: Mitt Romney’s Plan to Turn Around the Economy. September, 2011. Accessed November 19, 2011.
PARKER, A. and RICH, M. Romney Lays Out His Economic Plan. September 6, 2011. Accessed November 19, 2011.
Newman, G. How The Economy Would Change Under Romney. October 17, 2011. Accessed November 19, 2011.Decoded Science