The Case for Mitt Romney – Part 2: The Romney Plan
First I have to lower some expectations. Day 1: Pulled straight from his television commercial. Romney has stated that he plans to fast track approval for the Keystone XL Pipeline. The sad truth, this is all but impossible now, it’s too late, we missed the boat, and guess who was right there for the rebound, a company by the name CNOOC, a Chinese state owned conglomerate, now has a roughly $15 Billion dollar investment in the Canadian Sands project by buying Nexen. Just another stepping stone is China’s buildup of owning and controlling a disproportionate share of the Worlds high dollar natural resources. What this means is that if it comes down to running pipelines from Canada to the Gulf coast vs. the Pacific coast of Canada, CNOOC is who will be making the decision. We had our window, and we blew it.
His other major task for ‘Day 1’ is repealing Obama Care, or at the least grant executive waivers to all the states. I have spent hours upon hours trying to glean some insight as to what a likely scenario will be in the coming years when it comes to this legislation. All I know for certain is that the process in which we got to this point makes no true sense to me, and I’m sure between now and November I, and a few million other people in the blogosphere, will have plenty to say about the feasibility of any action against Obama Care. It sounds simple enough, but without 60 votes in the senate, which I would declare unlikely, this is probably going to get messier well before it gets better. If some states use waivers and others don’t, if some states opt out of the Medicaid expansions and others don’t, then this law could end up being a cluster of ever changing parts which usually means an even bigger bureaucracy to manage all the different aspects that change state by state.
Wow, convinced yet? Me neither, but here is the good news…
Mitt Romney’s Tax Policy: We are told again, and again, and again, that the US is sitting on a huge pile of cash. Why? In a word, uncertainty. How many times has a fight broken out on capitol hill over taxes? Does Obama Care have taxes? Are we extending the Bush era tax cuts? For who? Payroll tax holidays? New taxes on the wealthy? What about capital gains tax rates? There are so many variables playing into what we will be paying on taxes anywhere from 5 months to 5 years from now. If you are preparing a family budget and are told your paychecks may be shrinking by 0%, 5%, 10%, 15% next year, would you go out and spend money now? Or start making sure your savings account was in good shape. (Hint: The smart answer is the latter one, and I hope most of you are doing this regardless).
So, what is the Romney plan? To stop the insanity! To throw out all these stupid temporary tax plans and put in a new low rate, broad based plan that removes many exemptions and simplifies the code. Without indulging in too many details, people have been comparing this approach to the Reagan Tax plan of cutting rates in 1981, then revamping the entire system in 1986. We could go into ideals of the Laffer curve or the law of diminishing returns, people will say that this will hurt the lower class, but from 1981 to 1987, the era of Reagen Tax cuts, the lowest Quintile (that is to say the bottom 20% of wage earners) effective tax rate went from 0.5% <drum roll please> to -0.6%. That’s negative point six percent, and then continued down to -1.6% by the time Reagan left office in 1989. And under the Bush Tax cuts for the wealthy from 2001 at -5.6%, it continued down to -6.2% by the time 2004 rolled around (Bush tax cuts from 01 and 03 fully implemented). Yet from ’81 to ’89 (Reagan era) total income tax receipts rose 56%, GDP rose prior to the ’09 collapse Bush saw a 15% increase, and that was not tax reform, simply a reduction in the tax rates. Romney’s plan speaks much more to the principals of the former.
A common part of Romney’s Fiscal plan is deficit reduction. Romney speaks very highly of the Paul Ryan budget plan. Although most people openly admit getting that bill passed through congress as is will be daunting, even if major Republican shift occurs this fall. The Romney plan calls for a day one <eek, I put this in the wrong spot!> reduction of discretionary spending of 5%. If you do not believe our current Debt ot GDP ratio is alarming then you probably also believe that denial is just a river in Egypt. Here is a short list of developed countries with more debt than their annual GDP; Greece, Italy, Portugal, Ireland, and as of 2011, the US of A has a Debt to GDP ratio of 103%. Not exactly a list of countries reaping the benefits of state investment. The Romney Plan is geared to stop this trend with no cost growth strategy (elimination of ‘Red Tape’), cuts to government spending, and gradual implementation of austerity measures.
Speaking of red tape, that is a line used far too often in politics today. If you have not hear Gov. Romney’s speech to the VFW, I would recommend watching the video, it’s less then 20 minutes and has some good insight to the Romney approach when it comes to cutting the bureaucracy, he tells a tale of navel ship building over the years;
“And while our output has declined, the bureaucracy has increased. There is enormous waste. Let me give you an example: During World War Two, we built 1,000 ships per year with 1,000 people in the Bureau of Ships – the purchasing department, if you will. In the 1980’s we built 17 ships per year, with 4,000 people in purchasing. Today, for 9 ships a year, it takes 25,000 people!
Let me tell you, as a conservative businessman who has spent most of his life in the private sector, I look at that kind of inefficiency and bloat and say, “Let me at it.”
The devil may lie in the details, but this makes sense to me, it has been too long since we have had an honest administrator leading this country. Too many items are passed down the political hierarchy and not enough simple questions asked to justify these figures.
I have spent an unhealthy amount of time looking at the numbers, reading into everyone from Paul Krugman to Thomas Sowell in an attempt to interpret the mountains of data. My personal conclusion, most economists are not stupid, but, you can spin numbers any way you want to support any theory. The real question at hand is not does a plan work on its merits, it is in how well it will be received. Having a fair, simple, low rate set in place for a long term, I believe, would be the best thing for the economy right now. Tax rates skyrocketed in the wake of World War II with little negative impact, why? People wanted to win a war, in the decades that followed, the US has conceded a good sum of it’s share of the global wealth, not necessarily a bad thing at its face, but we cannot count on exclusivity of our economic power to carry up forward, we have to attract business here from other countries and retain and grow our businesses here so they can compete with these global companies. This is a significant shift from our thinking of the 50’s, 60’s, and 70’s when logistics and communication capacities simply didn’t allow for the level of competition we see today. The Romney tax and regulatory plans acts upon these ideals and creates a business environment that can compete with other developed countries. We took similar steps in the 80’s when Japan emerged as a global competitor and when the USSR was our main competition, now it’s China and the EU. America can compete with the best of them, we have wealth, resources, and ingenuity, we need a set of rules that allows us to utilize these safely, cleanly, and last but not least, practically so that our wealth is not invested else wear, our resources are not exploited, and our ingenuity is not usurped as a result of an uneven playing field.
Next in this Series, Either “The Wisdom in his VP Choice”, or some other topic if he chooses someone stupid like Jan Brewer, or "Nevermind, I'm moving to Canada" if it's Sarah Palin.