Romney's Economic Plan: Would it Work?

Presumptive Republican presidential nominee Mitt Romney is running for the highest office in the land mainly based on his claim that he can work wonders with the economy.  To see what he has in mind to bring this about, I went to the Romney campaign web site to see what his plans are.  There I discovered  the most remarkable characteristic about the former Massachusetts governor's platform is how strongly it resembles the formula laid out by the most recent Republican president--George W. Bush.  Yes, that's right; the very policies Bush enacted that led to financial collapse and recession are the same ones Mr. Romney wants to bring back and says will restore prosperity this time.

The first has to do with the elimination of regulations.  In particular, Romney wants to repeal the Dodd-Frank financial regulations requiring oversight, transparency, shareholder involvement and consumer protections against risky secret hedge and derivative funds.   The above link will take you to an excellent synopsis of what it does.  Romney would have us go back to the unsupervised, casino-trading operations that put millions out of work and led to $1.5 trillion in bailouts for the "too big to fail" institutions.  Morgan Chase's recent $2-$3 billion debacle shows how little the giants have learned their lesson and how closely they still need to be supervised.  Romney would remove even the semblance of a brake on these high-stakes high-risk operations.  Leave these federally-insured investors free to take whatever wild ventures promise to make the highest short-term profits.  If it entails enormous long-term risk, no problem.  The taxpayer's dime will be there to bail them out.

The second part of the Romney program is a reprise and indeed an extension of the Bush tax policy.  The 2001 Bush tax cuts reduced the marginal rates about 3% for most payers, though 4.6% for the top earners.   Another round of Bush cuts in 2003 raised the brackets about 2%, effectively cutting taxes again.  See a detailed treatment of both cuts here.  Though the conservative Heritage Foundation forecast the plan would eliminate the deficit by 2010, what they actually did was turn a $230 billion yearly surplus from the Clinton years into a $450 billion deficit under Bush.  In fact, the Congressional Research Service finds that the Bush tax cuts have cost $2.9 trillion in deficits plus an additional $600 billion in debt interest payments since their enactment.  

For his part, Romney's site advocates another 20% income tax cut, across the board, along with the elimination of the estate tax.  The corporation tax on profits would fall, after expenses and deductions, by 29%.  Once again the wealthy would reap the lion's share of the reduction, while the middle class and poor would suffer the bulk of the pain.  That is because of the third facet of the Romney plan.

The third part is the spending side of the ledger.  Again, as with Bush, domestic spending would be slashed while military spending would skyrocket.  Romney would accelerate military spending even though we have disengaged from one war and are winding down another.  His plan calls for cutting $500 billion a year, though that would be greater for domestic priorities because of the augmentation for defense.  I was only able to identify $264 billion of cuts from the web site.  But much of it would come from enacting the "House Republican (Ryan) Budget" which would privatize Medicare.  Another part of the plan would make Social Security recipients wait until they are older to collect benefits. 

As usual, average people would be asked to do without so richer people could be given lower taxes, under the view that this would encourage growth and balance the budget.  The persistence of this ideology is rather astonishing, given its failure to produce either a balanced budget or increased broad-based prosperity any of the times it has been tried in past economic downturns, whether under Hoover, Reagan or either Bush.  Yet this is precisely what Romney would try again if he is given the chance.  Among other things, the success of the Romney campaign hinges on the American people having extremely short memories.