Simon Johnson: Mitt Romney and Extreme Fiscal Policy
The budget ideas of Mr. Romney and the other Republican presidential candidates in the primaries mostly focused on proposals to cut taxes. The Committee for a Responsible Federal Budget assessed Mr. Romney’s specific ideas as likely to increase national debt to close to 100 percent of gross domestic product by 2021, using net federal debt held by the private sector, which is currently around 75 percent of G.D.P. (I use the high-debt assumptions when thinking about any political candidates’ proposals; in my experience, something almost always goes wrong with more rosy forecasts.)
Mr. Romney has mentioned cutting tax expenditures - i.e., ways in which the government spends through giving various kinds of tax breaks - but so far he has been very vague on the details. To date, Mr. Romney has stood for cutting taxes and therefore increasing the deficit and debt relative to what it would otherwise be. (He embraces the wildly optimistic notion that such cuts would stimulate investment and lead to job creation, which in turn would increase tax revenue; previous tax cuts have not accomplished this.)
Mr. Ryan is different. Rather than just wanting to cut taxes, he definitely and very specifically wants to reduce government spending. Mr. Ryan’s proposals are phased in - and in some versions debt would increase a great deal before it stabilizes. The difference between his approach and Mr. Romney’s is fundamental and clear: Mr. Ryan tells you what he would cut.