Mitt Romney’s Economic Plan Smacks of Envy, Economic Confusion and Political Calculation
Presumed Republican presidential frontrunner Mitt Romney is well known for his tendency to flip flop on issues, but as those are already well documented, it should simply be said that we should be more concerned when people’s views don’t change. If so, it suggests they’re not learning anything such that their views aren’t evolving.
Arguably the bigger problem with Romney is what he believes now, or at least what he claims to believe. It’s his existing views that are dangerous, so if Republican voters hand him the nomination and worse, he’s elected, further destruction of a limping GOP brand appears a near certainty.
To begin, rather than be realistic about what can be achieved even assuming a sympathetic House and Senate, Romney has devised a 160 page, 59-point plan to boost the U.S. economy. He fails there alone.
If we ignore for a moment what’s in his plan, economies aren’t living, breathing blobs that need to be tweaked by philosopher kings of the Romney variety. Instead, economies are nothing more than a collection of individuals producing in order to consume, delaying consumption in order to grow wealth through the provision of capital to others, and generally looking to offer the most value to others with an eye on getting the most value.
That being the case, Romney’s economic plan, if credible, would require all of one quarter of one page. With “good, American jobs” or whatever silly poll-tested phrase he might use in mind, Romney would propose an aggressive reduction in the income/capital gains tax burden, something similar as it applies to ineffective, profit eroding regulations, the ability of Americans to trade freely with all comers irrespective of country, and a stable dollar necessary to assign value to the work, trade and investment that the individuals who comprise an economy engage in.
About Jimmy Carter, the late great Wall Street Journal editorial page editor Robert Bartley observed about the micro-managing president that he knew he would fail the minute he heard Carter was overseeing use of the White House tennis court. A president that would focus on the inconsequential would miss the big picture, and for coming up with 59-point plan to fix that which is basic, Romney too seems to miss the big picture.
Of course when he addresses issues, his viewpoint has a tendency to terrify. Most notable here is his approach to China (NYSE:FXI). About a country whose rise from the ashes of communism is one of the happier stories of modern times, along with one that has been profoundly brilliant for the average American, the GOP frontrunner says we must “get tough” on.
What might he mean? Is he bothered by the peg of the yuan to the dollar, something a good number of countries similarly pursue? They do so to enhance the purpose of all production, which is trade. To the extent that he deems the yuan “undervalued”, there he reveals a total misunderstanding of money.
Not a commodity, money is merely a measuring stick that facilitates the real exchange of wealth. In that sense money should be issued solely with stability in the value of the unit of account in mind, after which it can’t be over or undervalued. To the extent that the yuan is weak today, and it is, that’s the case because the dollar is weak. If the dollar were strong, so would be the yuan.
That Romney doesn’t understand this, or worse ignores it to score cheap political points is not the stuff of quality leadership. A leader would embrace China’s rush to the first world, call for a stronger dollar, all the while encouraging a tight relationship between the yuan and dollar as a way of fostering peace between the world’s lone superpower, and an ascendant one.
Assuming the horrifying thought that he believes China’s exports hurt us such that we must “get tough,” we have to similarly ask what he could possibly mean. Trade occurs among consenting individuals, and is the result of each participant valuing the surplus of the other more than what they presently possess. If I choose Burger King over McDonald’s (NYSE:MCD), should politicians “get tough” on Burger King? As it applies to China, should a politicians “get tough” on Chinese whose labors give Americans what they want in exchange for what they produce?
This is particularly notable considering Romney’s proud assertion that “I’m not running for the rich people.” More on the impoverishing nature of the previous statement later, but if he’s not running for the “rich people”, implicit there is that he’s running for those not rich, and as evidenced by Wal-Mart’s (NYSE:WMT) import of Chinese goods such that Wal-Mart shoppers receive a raise nearly every time they enter one of its stores, it’s passing strange that Romney would want to “get tough” on that which improves the lives of those not rich. Assuming the utter falsehood that China’s economic rise explains high unemployment stateside, should non-rich Americans be forced to buy higher-priced American-made goods in order to subsidize their fellow countrymen? Some would call such a scenario theft.
On tax rates Romney commits yet another error in his monstrosity of an economic plan by virtue of his idea to eliminate the capital gains tax, but only for those making under $200,000 per year. For this we need to ask a basic question; as in among the entrepreneurs who dot the American landscape, how many received funding for their business from earners below the $200,000 line? It’s probably hard to measure such a statistic, but it should be said that billionaire Peter Thiel provided the seed capital for Facebook, and with Silicon Valley venture capital funds generally deploying the capital of the super-rich, it’s fair to say that the very individuals with the means to lift the non-rich into the rich category tend to earn more than $200,000/year themselves.
To those rich Romney is essentially saying he’ll penalize them for delaying consumption so that a nascent business can receive capital, which is really his way of saying that to score more cheap political points, he’ll on the margin sell the non-rich down the river. That Romney’s unwilling to elevate society’s commercially “vital few”, or at the very least remove burdens on them, tells us much that we need to know about how effective he would be as an economic president.
The late Boston Herald-American columnist Warren Brookes long ago observed that “Envy in reality is the single most impoverishing attitude of thought.” Mitt Romney’s economic plan smacks of envy, economic confusion, and political calculation the likes of which ensure even more economic desperation should he ascend to the White House. If he’s the best the GOP can come up with, better for the Party’s dying brand to wait for 2016.
John Tamny is editor of RealClearMarkets and Forbes Opinions, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading.
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