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Conventions 2012 / Analysis

The Risks of Romneynomics

Images of Ronald Regan form the backdrop of the stage at the 2012 Republican National Convention in Tampa, Fla.(AP Photo/Charles Dharapak)

photo of Jim Tankersley
August 31, 2012

It’s not 1981 in America.

Three decades after the Reagan Revolution, the country’s economic problems have evolved. Economic data show this clearly — and so do polling data.

This is the great blind spot of Mitt Romney’s economic plan, the great danger to the unemployed and underemployed if he wins the presidency but does not adjust, and one of the principle reasons the former Massachusetts governor is not trouncing President Obama right now.

 

The American economy is floundering in the aftermath of the Great Recession for a variety of reasons. One of those could well be threats of higher taxes and impending federal regulations, the center of Romney’s diagnosis of the economy’s ills. But data suggest other factors play a much, much bigger role.

Chief among those factors: Slowdowns and financial turmoil across our increasingly interconnected trading partners — China and Europe, primarily — and our struggle to shake the effects of a housing bubble that burst violently, then festered while the Obama administration trained its economic efforts elsewhere.

Romney themed the meager economic substance of his acceptance speech on Thursday night at the Republican National Convention around the tax and regulation argument, with a dash of drilling for more oil and gas.

He promised that “unlike President Obama, I will not raise taxes on the middle class.”

“We will champion small businesses, America’s engine of job growth,” Romney said, summarizing the final point of his economic plan. “That means reducing taxes on business, not raising them. It means simplifying and modernizing the regulations that hurt small business the most.”

It was a speech the Gipper himself could have given. That’s the problem.

In the words of David Walker, the former federal comptroller who now tours the country sounding alarms about America’s jobs and debt problems, financial crises change countries. Permanently. America just suffered the Mother of All Financial Crises. So why would Americans expect their economic fix to come from a set of ideas that demonstrate no learning from that crisis — that more or less every Republican nominee has run on since 1980?

The critique isn’t limited to Romney. To the extent Obama has offered a cogent vision of how to create millions of jobs and spur rapid growth right away, he’s failed to articulate what he’s learned while overseeing a historically tepid recovery and how he’s updated his plans accordingly.

But it was Romney on the dais on Thursday night in Florida, and it is Romney asking voters to give him a chance to improve on Obama’s economic performance. It is Romney and his economic team and his supporters who are arguing, in the course of a nostalgia-soaked convention, that America can go back to the boom of the 80s if it just reverts to Reagan’s policies, so it is Romney who deserves to confront the following two realities.

First, the next president will lead an American economy very different than the one Reagan had at the start of his second term. Tax rates are substantially lower. Housing prices and construction investment, which usually drive growth after a recession, remain horribly depressed. Europe is in recession, and China's economy is slowing, and U.S. fortunes are a lot more tied up with theirs in this era of globalization.

Government employment is substantially lower, too. You read that right: In the three years following the end of the 1982 recession, government purchases — the value of things the government buys, like jet fighters and copy machines — increased by 15 percent after adjusting for inflation. That growth boosted GDP and lowered unemployment. In the three years following the end of the Great Recession, inflation-adjusted government purchases declined by 4.5 percent. By June of this year, three years after the recession ended, the federal government employed 236,000 fewer people than it did at the end of 1985.

But the biggest change is the absolute crash of the great American jobs machine over the last 12 years. It was only recently that total U.S. employment returned to the level George W. Bush inherited from Bill Clinton. Even before the Great Recession, job growth in the 2000s was on pace to be the lowest of any decade since the Labor Department started tracking job creation. That stagnation came in spite of massive tax cuts passed under Bush, championed by many of the economists now advising Romney.

Which brings us to Romney’s second problem: Americans remember the last decade. If a large majority of voters really believed tax cuts and deregulation were the tickets to runaway growth, Romney would be running away with this election. He’s not — even though poll after poll shows huge majorities don’t like Obama’s economic policies and want to try something new.

Many pollsters, including those who do surveys for National Journal, are finding mounting evidence that voters don’t believe either candidate will do much to improve their economic lots. Perhaps Romney — and his incumbent opponent — should listen to the crowds. There’s still time to offer fresh solutions for voters who can’t borrow against their homes to start businesses or build new patios, or are struggling to sell innovative new products to customers abroad.

Before Romney took the stage, his running mate, Paul Ryan, promised a speech that would “go into granular detail about these ideas to get people back to work.” Detail is nice. Relevant detail would be better. 

 

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