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I understand the politics of Gov. Mitt Romney’s opposition to the tax deal.
In an oped in the Dec 14 USA Today, Romney has aligned himself with Rush Limbaugh and the Wall Street Journal against the dealmakers in Congress. That’s the safest ground for Romney to stand, given (1) Republican conservatives don’t trust him and need to be wooed and that (2) Republicans do trust him and expect him to govern responsibly whatever he may say on the campaign trail.
If the deal were to fail, that failure would open a powerful issue for the Republican presidential nominee in 2012.
So I get it, I get it. Romney is a politician, he must act politically.
But can we notice that Romney’s stated grounds of opposition to the deal make no sense?
(1) Romney hits the deal for failing to remove uncertainty about tax rates beyond the 2-year horizon.
True, that. But the defeat of the deal will lead to much greater uncertainty. Will the next Congress pass – and will President Obama sign – a longer extension of the tax cuts in 2011? Who knows? Conceivably we could face 2 years of higher tax rates starting 18 days from now, followed by the 2012 elections, followed by – again- who knows?
Besides: from what I hear, the forthcoming tax increases that worry business owners most are the tax increases embedded in the healthcare reform. A “nay” vote on this deal does nothing to alleviate those concerns.
If “certainty” is your concern, the “aye” vote is the vote to cast.
(2) Romney hits the deal for increasing the deficit.
And yes, that is true too. Here is what is weird.
Two of the largest elements of the deal – the unemployment insurance extension and the partial payroll tax reduction – Romney specifically praises as “good.”
More to the point: Romney’s preferred tax alternative, the permanent extension of the Bush tax cuts, would increase the deficit much more.
Finally, the most immediate driver of the deficit is the severe recession. If the tax deal alleviates the recession, it could actually improve the deficit situation. (A point Romney implicitly concedes in the 5th paragraph of his piece.)
(3) Romney hits the deal for reducing only the employee side of the payroll tax.
I’ll quote this passage in full so you can see how strange it is.
Part of the tax deal is a temporary reduction in payroll taxes. The president was insistent, however, that only the employee’s payroll taxes be reduced — the portion paid by the employer is to remain the same. Again, the president is looking to get more money into the hands of the consumer to boost near-term spending. But by refusing to lower the cost of hiring a new employee, he fails to encourage what the American people want even more than lower taxes — more good jobs. Like the income tax deal, the payroll tax deal will add to the deficit.
Now ask yourself: what is Romney saying here?
Is he objecting that the payroll tax did not include both the employer and the employee side? If so, that objection makes nonsense of his complaint about the deficit.
Is he suggesting that the payroll tax cut is not a good idea because it increases the deficit too much? If so, why did he describe the payroll tax cut as a good idea at the beginning of the piece?
Is he suggesting that the employer side of the payroll tax is more important than the employee side? Mitt Romney of all people in this presidential race understands that both sides of the payroll tax are paid by employees, the division is just an illusion.
(4) Romney hits the bill for adding to the cost of unemployment insurance.
Romney makes many good points about the defects of the current unemployment system. He urges its eventual replacement with “a very different model, perhaps establishing individual unemployment savings accounts over which employees would exercise direct control when they lose their jobs …” That’s an intriguing idea, although it certainly does sound like a government mandate. However, Romney agrees that the middle of a savage recession is not the right time to reinvent unemployment insurance. He praises the extension of benefits as a good thing. Accordingly, he falls back on the Republican talking point, “While we cannot rebuild our flawed system overnight, we are surely not required to borrow the funds to pay for it. In spending $56.5 billion to extend benefits, the deal is sacrificing the bedrock Republican principle that new expenditures be paid for with offsetting budget cuts.”
Can that really be sufficient reason to impose a huge tax increase on the US economy in less than three weeks, with only a hope and a prayer that a better deal can be done in the weeks or months ahead? It hardly seems convincing.
Which takes us to point (5) Romney hits the deal for delivering short-term stimulus that will aggravate persistent high unemployment.
I think I understand what he’s driving at. Romney seems to believe that our unemployment problems are structural, not demand-side, and that the remedies require bigger economic changes. That’s a smart point and probably a true point – but it raises the question why Romney supports renewal of the Bush tax cuts at all, rather than a tax reform that reduces deficits by shifting the burden of taxation away from production to consumption.
There is an old joke that Wagner’s music is not as bad as it sounds. Something similar can be said of Romney’s campaign economics. Concealed within the triangulation are some very smart ideas. I remain convinced: this man could be a very good conservative president – if conservatives will permit it.
Romney reminds me a bit of Ward from Leave it to Beaver. The guy is playing a character and every time his show comes on I am compelled to change the channel. Romney is the kind of guy that fits the wee hours cable reruns . He is dated, cheesy and just not prime time material.
Yet another weak leader in the running for the GOP ticket!
Off the topic, I have something for the free traders out there (especially Rabiner) that goes with your “will conservatives help the middle class” post.
Obama pulled a Reagan and it worked!
There is one horse considering the GOP race who says the tax compromise was necessary and so is taxing Chinese imports.
Very Reaganesque I would say….
We need bold, confident leadership like Reagan. Romney is neither one of those…
take note of page 8 …..
http://www.americanmanufacturing.org/files/tireimportsreport.pdf
(1) Romney hits the deal for failing to remove uncertainty about tax rates beyond the 2-year horizon.
True, that. But the defeat of the deal will lead to much greater uncertainty. Will the next Congress pass – and will President Obama sign – a longer extension of the tax cuts in 2011? Who knows? Conceivably we could face 2 years of higher tax rates starting 18 days from now, followed by the 2012 elections, followed by – again- who knows?
This circles around the actual point – which is that tax uncertainty in the marketplace isn’t really due whether this deal passes or fails, but rather around the larger issue that the United States has no predictable taxation policy at all. At this point in history, taxes are completely political and unhooked to anything outside of winning elections. And _that_ is a high degree of uncertainty.
If Romney is truly worried about future tax rates shouldn’t he be blasting his party and George W. for having placed our nation in this unenviable position in the first place?
It was, after all, the GOP who elected to go forward with tax cuts which were not offset by spending cuts and were not made permanent in the first place.
Seems his problems with such are misdirected.
forkboy, your comment ignores the real problem – spending.
In other words, you take relentlessly rising spending as an untouchable given, which then drags taxes relentlessly upwards along with it. Perhaps that’s politically true, but from a policy perspective it needn’t and shouldn’t be.
At this point anything Romney does or suggests is purely political designed to position himself for the next election.
Anything he says is designed to maximize his bomb throwing a the President and minimize his on decision or thought risk taking. It is very easy to only criticize or come out against anything the president does. No risk in that. His standard will be the Tea Party standard, which is no compromise no matter what. Not sure that is showing leadership though.
Xunzi Washington,
If there is any tax uncertainty it should be around the deficit and nothing else. The deficit will largely self correct with the economy.
In any event corporations do no make decisions based on how much taxes they pay. They only make decisions based on how much demand they expect. Demand will not be impacted that much by only marginal increases in consumer taxes if the Bush tax cuts are left to expire.
Carney,
Other than emergency spending to fix the economic mess Bush left us in, government spending has not gone up at all, in fact it has been trending down since 2007. Government spending as a percentage of GDP has remained at close to 20% since the 1950s. Spending will go up going forward base really on two reasons; healthcare costs and interest on the debt. We need to find future solutions for that, but government spending is not a problem right now. The deficit is entirely cause by the revenue side. Those tax cuts and the recession killed us and the deficit. Just look at the numbers. Prove it otherwise!
i think forkboy has a point.
in the bush era, the gop passed the tax cuts…..and started the iraq war. (2 really big hits on the budget)
….and think of the spending(!!) that war generated! (and no, i’m not talking about the afghanistan war, there was no choice there…..but i cant help but think that if the usa had focused on afghanistan, rather than iraq,….we might be farther along in the war on terrorism)
Why would Romney do this? Why wouldn’t he want to assure Sarah Palin that if she supports him, that he will do the right thing. Simply a dumb move. He is a moderate who is going to flip to a conservative stand. This is not going to work. The difference between a McCain and a Romney is that McCain brought a woman to the stage that was willing to be extreme to get power and money. Romney must think that if he starts playing Mr. Conservative people will flock. There is a breakdown here, a mis-read of the conservative need.
President Obama was painted as an extreme liberal. Ask a few liberals if they think Obama is as Liberal as them. I would say, that he has let them down. The Rush, Becks and Palin have been the sirens of creating the exact opposite. The Tea Party jumped into the fray and silenced the true conservative thinkers. They are moderates pretending to be conservatives. Let’s say that they get in for giggles. What is going to happen when the liberals paint them as far right extremist who want to rewrite several of the laws that we have in place? Buckle up for more of Hitler and all the stereotypes that further divide the country. They will have a lot of material to work with and the R’s will be painted as the true bad guys. We are a country of immigrants and I guarantee that if people start playing purist, it will will backfire.
What (No Labels) and the centrist groups have right is that they want to bring the attention to the middle. The problem is that some of there “members” are going on interviews and leaking their allegiance by invoking President Reagen’s kindness. If your going to have a “No Labels” group, make sure that it is not obvious that it is a right leaning group for Republicans and Independents. That will also backfire.
What do I read from the election in 2010? People do not have jobs. They voted out people who were not making their economic situations better in their states. If they were watching a tone of t.v. the mood or the tenor of the news has been depressings. If a person is not politically curious, they might believe a ton of the bull that was fed to them on a daily basis. We have had a major advertising blitz on making people feel horrible. Why did Bush leave with the ratings he did? He left as the villian. Who has had the last laugh and a best selling book? Palin will rebound as well, let’s just hope she goes away and does it quietly. We believe in redemption after all and that hero that will save the day!!! Ask people how they would spend money if they had control of the government budget. I guarantee that Republicans will pick Liberal ideas and the Liberals with have conservative ideas. We don’t ask people to define why they are R’s or D’s. They vote for the guy they like or based on the way they always vote (those conditioned).
Carney // Dec 14, 2010 at 10:12 am
“forkboy, your comment ignores the real problem – spending.”
OK, so can you tell us exactly what deep cuts to popular programs Romney (or any Republican for that matter) proposed before January 2009 that would have offset the massive Bush tax cuts they approved?
Republicans can get a better deal next year. Obama needs strong economic growth to get reelected; thus, he needs to keep the Bush tax cuts. Why not go for the tax cuts without all the spending?
As for the current Congress, the spirit of Oliver Cromwell should be used for the Rump Parliament- “You have sat here too long for any good you have been doing lately…Depart, I say, and let us be done with you. In the name of God, go!” One can agree that Cromwell never spoke for God and yet agree with his contempt for the Rump Parliament just as conservatives must share a contempt for the current US Congress.
Is there a lamer argument than the need for “tax certainty”? If so, I can’t think of it.
We had all the “tax certainty” in the word during the Bush Administration…and our economy ended up in the toilet.
DFL
Not sure that the tax deal will do much for anyone. the “Bush” tax cuts didn’t create jobs for the past 10 years, so why would their continuation do anything more. You want risk to the economy: (1) 99ers that are starting to roll off, (2) foreclosure is finally getting started in earnest — those who didn’t pay their mortgages will now pay rent, (3) state and local government have to cut expenses dramatically especially if the reconstruction bonds are killed (99% sure thing) in January.
That’s impact to the U.S. economy, the “bush” tax cuts add little to the pie, they just remove the argument for 2012 (so it’s all about elections). I agree that the health care mandate is the issue for businesses.
Finally, there is a realization that in Washington (at least for now) deficit don’t matter as long as the politicians get what they want. That is worrisome. I don’t care where the revenues and expenses come from they eventually have to balance. How many commentators were making fun of Greece and Ireland? Guess what America’s balance sheet is worse. As a reserve currency that doesn’t matter too much now, but it will eventually.
Does anyone know the cut-off time to toss your hat into the race? When will the Independents (if they run a candidate) and the R’s declare that they are running for President? Just want to know if they can do this a year before the election?
The uncertainty argument is such B.S.
The best way to do away with uncertainty is to do away with elections, or at least economic policy, or healthcare policy, or environmental policies as election issues.
armstp, hasn’t spending, including domestic discretionary spending, far outstripped both inflation and population growth?
And LeftistNYer (who is no centrist, being unable to identify a single conservative policy stance he takes, without straining definitions), your question is loaded in several ways.
In the first place, assuming tax cuts must be “balanced” with spending cuts assumes all money belongs to the government.
In the second place, it ignores the reality that reducing the burden of government increases economic growth and thus revenue. Reagan cut taxes, net, in the 80s (pay attention the word NET before you yammer about this or that tax hike) and yet revenue doubled. JFK cut taxes and revenue went up as well. Revenue also rose after the Bush tax cuts. Now I’m not saying all tax cuts are always revenue enhancing or revenue neutral, but it’s important to realize that humans respond to incentives, and reducing an disincentive usually results in increasing the activity in question. Isn’t that why leftists don’t want cuts in gas taxes or cigarette taxes? Hard to argue, then, that no increase in economic activity will result after reducing taxes on it.
In the third place, not all spending programs are broadly popular, and not all budget cuts need be deep.
In the fourth place, it is not necessary for Romney et al to have proposed spending cuts in line with your demands for the point I made to be true.
I’m sorry Mr. Frum, please show me the economic data that proves that tax cuts create jobs. Where are they?
This has been the biggest lie of the decade. See here:
http://economix.blogs.nytimes.com/2010/11/18/were-the-bush-tax-cuts-good-for-growth/
forkboy, your comment ignores the real problem – spending.
But why is the real problem spending if we fund it fully. Was spending a real problem during the Clinton years when we balanced the budget, had low unemployment and inflation, and strong growth? Saying spending is the real problem is like saying eating is the real problem, so we should stop eating. It is meaningless.
Government should be like a proper diet, enough to keep the system (society) functioning optimally.
Of course spending is not the real problem. You can state that overspending is but at least get the terminology right.
Carney wrote:
> it ignores the reality that reducing the burden of government
> increases economic growth and thus revenue.
Let’s see. Bill Clinton raised taxes in 1993 while George W.Bush implemented massive tax cuts in 2001 and 2003.
According to Carney’s logic, the U.S. economy ought to have experienced anemic growth throughout the 1990s as free enterprise chafed under the burden of Clintonesque high taxes, before the “Bush Boom” of the 2000s…
http://www.tnr.com/article/politics/less-moore
MARCU$
mlindroo
Here is a little more to back up your point
Rev up our DeLoreans, restart our flux capacitors, and return to the roots of modern-day Republicanism.
Among conservatives, Ronald Reagan is remembered as the tax-cutter in chief: the supply-side hero whose Economic Recovery Tax Act of 1981 slashed the top marginal tax rate by more than half.
But the truth is that after his first year in office, Reagan was actually willing (if not always happy) to compensate for gaps in the government’s revenue stream by raising rates.
In 1982, for example, he agreed to restore a third of the previous year’s massive cut. **It was the largest tax increase in U.S. history.**
The Gipper also raised taxes in 1983. And 1984. And 1986.
The party sainted him for his efforts.
That permissiveness ended with Reagan’s successor, George H.W. Bush. While campaigning for president in 1988, Bush made a solemn promise: “no new taxes.” But in 1991 he accepted a small tax hike as part of a major deficit-reduction package.
Conservatives—who’d become militantly, monolithically antitax in the Gipper’s wake—were enraged. Never mind that the package paved the way for the booming economy and balanced budgets of the 1990s
To be fair, Carney also did write:
> Now I’m not saying all tax cuts are always revenue enhancing or revenue neutral
And I am not saying all tax hikes are good! In fact, I reluctantly agree that ending the Bush tax cuts right now probably would be a bad idea. But if the economy is doing better in 2013, there is NO EMPIRICAL EVIDENCE WHATSOEVER supporting the claim you can’t have strong economic growth if we revert back to the previous (Clinton-era) tax rates in order to reduce the deficit. And a more careful look at government spending, revenues, taxes and economic growth in 1980-2010 ought to dispel most supply side myths.
http://www.nationalreview.com/articles/229574/goodbye-supply-side/kevin-williamson
MARCU$
kriszti, re tax cuts for employers…I too am tired of this fairy tale. As a small business owner, if I had a good reason to hire someone, if it would increase or improve my business in some way, then I’d find a way to do it without the government’s assistance. Its called growing your business. A business owner should be willing to invest their OWN money to grow their business, not expect handouts in the form of tax cuts from Uncle Sam. Tax cuts as job creators is a sham and an excuse to cut taxes.
politicalfan,
There is no official cut off to enter the Presidential primary race. Candidates can enter at the very last minute. However, most likely want and need to be in the race official at least a year ahead of the first primary, which is in Iowa on February 6th 2012. In 2008 most candidates on both the Republican and Democratic side announced their entry into the race in February. Only McCain waited to the end of March, but he said at the end of Feb. that he would officiallyl announce his candidacy at the end of March, so he effectively entered in Feb. I believe Thompson entered late, but that killed him. So we should expect to see all the candidate announce in the next month or two. However, most candidates should have already been visible by raising money, speaking at important party events, putting together a team, visiting important early states and testing the waters, so we probably already know the names of the candidates and the chances of anyone new coming into the race is slim and the window is closing very fast.
Huckabee probably waits to the last minute before he declares his candidacy because he does not want to give up his FOX TV show too fast, as it represents millions in free campaign publicity and advertising.
Carney,
” ignores the reality that reducing the burden of government increases economic growth and thus revenue.”
I think you are talking about your conservative “reality” which is different than normal reality.
First of all, Bush cut taxes and then the very next year he gave back most of those tax cuts by raising taxes. He also put the pedal down on spending blowing up the deficit to the largest since WWII. So was the only 4 years of growth in the 80s from a mostly 1 year tax cut or from the enormous spending the Reagan did?
The Bush tax cuts did absolutely nothing to improve the economy, jobs or increase tax revenue. Tax revenues actually went up above inflation during the Bush years, but that was according to the CBO entirely because of an increase in corporate taxes from higher corporate profits and because of a change in accounting and the way equipment costs were written off.
http://cbo.gov/ftpdocs/81xx/doc8116/05-18-TaxRevenues.pdf
http://www.factcheck.org/taxes/supply-side_spin.html
armstp,
Thanks!!!
Early in your piece, you pointed to the explanation for the illogic. You wrote:
“Two of the largest elements of the deal – the unemployment insurance extension and the partial payroll tax reduction – Romney specifically praises as “good.”
What that tells me is that he is trying to appeal to both sides of the economic spectrum. So whereas other members of the GOP — who choose to put winning above governing and tax cuts above deficit reduction — ignore the vanishing middle class and less wealthy people, he makes it sound like he cares; though if that were true, he would make sensible decisions about reducing the deficit which he does not.
Who is the real Romney? He’s become as politically predictable as Palin. I guess you can be well-educated and smart and still choose winning over governing and hope no one notices your positions are contradictory.
Romney changes:
http://www.buzzle.com/articles/mitt-romney-changes-position-on-gay-rights.html
http://trueromney.com/2009/09/mitt-romney-changes-position-on-bank-bailouts/
The problem with changing is that the people can actually jump online and visit pro-Romney sites as well as anti-Romney sites. If I am hunting for a candidate, I am going to look at the the negative sites to catch a tiny bit of negative truth. We have had so many overtly obvious candidates flipping, that it is going to make for interesting campaign advertising. How about a candidate that doesn’t flip 100 times? Once they become President, we know that they will have to flip once again. Be who you are!!!
I want a candidate that will stand tall and be “real.” If that is a bogus hope, then good luck for anything ever changing.
I remain convinced: this man could be a very good conservative president – if conservatives will permit it.
This many could have been a very good conservative president… 4 years ago before his “OMG revelation!!” moment. Now he’s nothing more than an opportunist trying to placate those who he feels are most powerful in the Republican party. At best he’s the leader of a very, VERY weak field. At worst he’s someone who will say whatever is needed to get elected, whether that’s of a Democratic state like Mass, or a conservative GOP primary…
Who is next? Who and where are the serious Republican candidates?????
politicalfan
I’m fed up with all of the placating, talking points jabbering, no leadership skills, butt kissing, special interest addicted, wanna be big shots, Goldwater conservative crapping on, bandwagon jumping, no balls, bigoted, press dodging, propaganda spreading so called Republicans.
We need a tough as nails, business savvy, put the fear of god in the competitors, deal making, project completing, known entity, charming SOB. There is only one person who is considering the run who fits that profile.
Reagan & Goldwater would be RINO’s to this pack of morons!
The only Reagan/Goldwater Republican considering the jump is Trump.
Think about how he would handle the Demint’s, Palin’s & the rest of the inadequate big shot wanna be’s.
He may be an SOB but he’s our SOB and the rest of the world knows he is an SOB and by God he is a REAL REPUBLICAN…..
Trump is not an 800 pound gorilla in the room he is a 50 ton GOP elephant juggernaut.
I voted for Obama and Trump would swing me in a heartbeat…..
I think Palin or DeMint would chew Trump up and spit him out. They’re seasoned, savvy politicians, and in politics that counts for a lot.
Willyp
Let’s hope we get a chance to watch those little Ticks try and crawl up his leg……
WillyP-
My hot tea just flew across the room. Are you kidding me? They can not appeal to everyone in their own party. They are suppose to reach the middle and the left? Sure!
Palin would need to wait for a long while before she runs for office. She is going to be climbing a very difficult mountain in the lower 48 to prove that she knows what she is talking about.
DeMint has his own issues and I would give Palin an “equal to not greater than marking in comparison to DeMint.” If you’re thinking in terms who can appeal to the conservatives who are not paying attention. Sure, Palin is your gal. I am not sure all of DeMints party likes him.
Once people start looking at her moderate record and the “I was for it before I was against it” footage- it might come back and haunt her. Hold on to your dream. Anyone can stage a comeback but it takes time.
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