Romney's Economic Plan Doesn't Actually Solve Any Problems

Here's my plan: The super rich get these big pieces of the pie. Everyone else gets the crumbs. (AP)

Many of you may recall the parable of the "streetlight effect." It goes something like this: A policeman sees a man searching for something under a streetlight and asks what he's lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the man replies, no, that he lost them somewhere else. The policeman asks why he is searching here, and the man replies, "this is where the light is."

It highlights a bias where people only look for solutions where they are easiest or most familiar. You saw this come in to play with the invasion of Iraq, fulfilling a long-time goal of the NeoCon foreign policy intelligentsia, regardless of the facts. And in the case of Mitt Romney's economic plan it really highlights a conservative bias in recent decades, where they see lower marginal tax rates for upper income people as the solution to every economic problem, even when all objective analysis says it wouldn't actually help the current situation. The solutions to our economic problems may be over here in the dark, but conservatives prefer to push for lower taxes for rich people over there in the light.

Only a supply-side true believer could look at what has happened to economy over the last 10 years and conclude that what we really need is another round of budget-busting tax cuts for the super rich.

Greg Sargent of the Washington Post and others have been pointing this out for months.

I asked two economists to take a look at that question. Their conclusion: While both said they support some of Romney’s long term goals, they both agreed that Romney’s ideas would do little or nothing to fix the immediate crisis, and could in the short term make things worse.

He said he would tap our energy resources to “put a lot of people to work in the energy sector.” He said he’d repeal Obamacare, which is “scaring small businesses from hiring.” He said he’d balance the budget so people know “investing in America is going to yield a return in dollars worth something.” He vowed to “open up new markets in American trade.” He said he’d revamp the National Labor Relations Board and lower tax rates on employers, both of which would make it easier to hire people.

“Are all these things going to reduce the unemployment rate from eight to five in two years? No,” Joel Prakken, the chairman of Macroeconomic Advisers, tells me. He described Romney’s ideas as a “a bundle of reasonable policy proposals that could well stimulate the economy from the supply side over a number of years, but would do little to stimulate aggregate demand in the short run. The reason that unemployment is as high as it is is inadequate aggregate demand, not inadequate supply.”

“On net, all of these policies would do more harm in the short term,” added Mark Hopkins, a senior adviser at Moody’s Analytics. “If we implemented all of his policies, it would push us deeper into recession and make the recovery slower.”

Sargent's post delves into the specifics of his five-point plan. So please go read the whole column. And in fact Romney's plan is largely the same five-point plan that both George Bush and John McCain ran on in 2000, 2004, and 2008. Once again, no matter what the ailment is, Republicans offer the same old prescription every time.

Or as President Obama put it in his convention speech:

...And I ran for President because I saw that basic bargain slipping away. I began my career helping people in the shadow of a shuttered steel mill, at a time when too many good jobs were starting to move overseas. And by 2008, we had seen nearly a decade in which families struggled with costs that kept rising, but paychecks that didn’t; folks racking up more and more debt just to make the mortgage or pay tuition; put gas in the car or food on the table.

And when the house of cards collapsed in the Great Recession, millions of innocent Americans lost their jobs, their homes, their life savings, a tragedy from which we are still fighting to recover.

Now, our friends down in Tampa, at the Republican convention, were more than happy to talk about everything they think is wrong with America, but they didn’t have much to say about how they’d make it right.

(APPLAUSE)

They want your vote, but they don’t want you to know their plan. And that’s because all they had to offer is the same prescription they’ve had for the last thirty years:

“Have a surplus? Try a tax cut.”

“Deficit too high? Try another.”

(LAUGHTER)

“Feel a cold coming on? Take two tax cuts, roll back some regulations, and call us in the morning.”

(APPLAUSE)

Now, I’ve cut taxes for those who need it, middle-class families, small businesses. But I don’t believe that another round of tax breaks for millionaires will bring good jobs to our shores, or pay down our deficit. I don’t believe that firing teachers or kicking students off financial aid will grow the economy, or help us compete with the scientists and engineers coming out of China.

(APPLAUSE)

After all that we’ve been through, I don’t believe that rolling back regulations on Wall Street will help the small businesswoman expand, or the laid-off construction worker keep his home. We have been there, we’ve tried that, and we’re not going back.

We are moving forward, America.

(APPLAUSE)

I won’t pretend the path I’m offering is quick or easy. I never have. You didn’t elect me to tell you what you wanted to hear.

OBAMA: You elected me to tell you the truth.

(APPLAUSE)

And the truth is, it will take more than a few years for us to solve challenges that have built up over decades. It’ll require common effort, shared responsibility, and the kind of bold, persistent experimentation that Franklin Roosevelt pursued during the only crisis worse than this one.