The Romney Recession: How President Mitt Would Squash the Recovery
The Romney Recession: How President Mitt Would Squash the Recovery
MITT ROMNEY is a turnaround artist. At Bain Capital he seized faltering businesses too blind and bloated to mend themselves, restructured them, then took them public. Now Romney wants to seize and restructure U.S. economic policy. The only difference is that the federal government is already public. Should we let him acquire it?
An underlying nonpartisan truth is that no matter who becomes president, the economy won’t likely improve very quickly during the next four years. As an August Congressional Budget Office (CBO) report points out, downturns brought on by financial crisis—as the Great Recession was—are typically followed by unusually slow recoveries, with gross domestic product (GDP) depressed and unemployment elevated for at least a full decade after. The report also noted that recovery from any recession in which housing prices fall sharply (ring a bell?) will be slow and painful, because the housing market accounts for more than one-quarter of all U.S. investment. If that weren’t enough bad news, the ongoing euro crisis continues to pose significant danger to the U.S. economy.
How would private-equity whiz Romney tackle this assignment? Say President Romney pushes through a permanent extension of all the Bush tax cuts, as he has promised to do. (President Obama would omit those for family income above $250,000.) That would give the economy more stimulus than Obama’s partial extension would, but not a lot more. That’s because the rich wouldn’t use much of their tax cut to boost consumption. And if demand remained low, no amount of investment could persuade bosses to do much hiring. “Cuts in taxes for the rich,” says Harvard economist Richard Freeman, “would spur growth in the Cayman Islands more than in the U.S.”
