Friday, December 17, 2010

Romney's Tax Op-Ed - What's So Hard To Get?

Mitt Romney penned an op-ed “Tax Deal, Bad Deal” published in the December 14th edition of USA Today. In it, the former MA Governor shared his views of the compromise tax bill, pointing out its design flaws, and how, due to the temporary extension of the tax rates, in the long term, it was a very poor deal secured by Republican congressional leaders. In the days since writing this, Romney has weathered a storm of wrathful criticism, from both Right and Left wing detractors. My question is: "What's so hard to get about what he's saying?"

The criticism leveled all week long, comes at Romney from two different angles; slamming him for shallow political pandering to the hard Right/Tea Party; as well for inconsistent economic theory. Critics site how Romney is engaging in double speak, saying “tax cuts” can be both good and bad for the deficit; extending unemployment benefits are good and bad and how the bill will provide a short term stimulus, but is a bad deal over time. Well, if one takes the time to read the article in total, you'll find out why.

On the political front, Romney, who many believe to be a 2012 candidate for President, was hit for political pandering many on the Right: conservative observer John Podhoretz called Romney’s action as “Inauthentic”; Hot Air’s Allahpundit summed it up as Romney “covering his ass”; were among the more strident. Larry Kudlow blasted Romney for having “bungled” the issue, citing a Wall St. Journal poll, showing high approval number for the deal, by respondents.

Really, Larry? What's wrong with Romney looking at the deal, and offering his opinion on what's wrong with it. After all, almost every GOP Congressman and Senator, seeking political cover from the spending involved, said they didn't like it but would vote for it. How are Romney's observations any different?

On the Left, the Boston Globe cited the op-ed as “opportunistic. Andrew Leonard of Salon wrote how Romney should be ruled out as a White House contender for being unoriginal. All over the road blogger David Frum has posted almost daily on Romney’s views, appearing both critical and supportive of Romney at the same time. What's amusing here is, how bloggers, pundits and commnetators bemoan the fact, "no one looks at the underlying problems" or "our political leaders take the easy path." Well her comes Romney, who know a thing or two about structuring a deal, resolving business problems and turning around bad economic situations, and POW!

Putting the politics aside for moment, focusing rather on how the deal was crafted, all Romney is stating is, the problem with the bill is the temporary nature of keeping the tax rates at current levels, are two fold:

-          A two year extension will not be motivation enough for businesses to make the kinds of investments, to truly ignite the economy, since there is not enough time to either earn back a return, or if a return will be realized, it would be just beyond two years, and taxed a potentially higher rate. Uncertainty is not good thing.

-          While over time lower tax rates will generate higher revenues to the Treasury, due to the short term nature of the rates and business not investing, those revenues won’t materialize, resulting in a deficit increase.

Romney further opines, while there may seem to be initial, perceptible benefits to the deal; level rates, extended unemployment benefits and a short term influx of cash to consumers, via a cut in the payroll taxes, the costs of the deal are too high, for it to work in the long term. In other words, this is just another “sugar rush’ for the economy, rather than a bill which looks at the structural nature of the problem and designing solutions for the core issues.

Romney’s reasoning is:

Of course, delay now is better than an immediate tax hike. But because the extension is only temporary, a large portion of the investment and job growth that characteristically accompanies low taxes will be lost. When entrepreneurs and employers make decisions to start or expand an enterprise, uncertainty about tax rates translates directly into a reduced propensity to invest and to hire. With only a two-year extension, investors know that before their returns are realized, tax rates may be jacked up to the levels favored by President Obama. So while the tax deal will succeed in temporarily putting more money in the hands of consumers, it will fail to deliver its full potential for creating lasting growth.”

The message here is pretty clear; this deal is trying to engage the accelerator of the nation’s economic car, while keeping the emergency brake on. In Romney’s view, this cmprimise will not spark the kind of growth America experienced in the mid 1990’s, for example, when Capital Gains tax rates were cut, giving a green light to investors to drive down the economic highway. Coupled with the increased spending for the unemployment benefit extension and payroll reduction, the terms of the deal are not as appealing over time, when cast against the short gains, which will avert the Media/Political class inspired tax crisis, may provide. Is that too hard for the political punditry to grasp?

The criticism seems a little too vitriolic, politically motivated and knee-jerk. Many of Romney’s passages have been taken out of context and dissected, critically shredded, then commented, blogged or opined about carelessly.  What many critics fail to grasp from this piece is, that in Romney’s view, we need to structurally resolve our problems, rather than just look at the short term quick-fix. That should be good and comforting news to both supporter and those critical of Romney, and how he would appraoch the job of President. 

This op-ed by Romney will no doubt continue to spark debate on both sides, on how to address and resolve our structural economic problems, and well it should. The links provided are chock full of one-liners, barbs and serious minded thoughts, to inspire ten posts. However the take away from this is unmistakable. Mitt Romney is taking on the issues from his vantage point of being a solid economic manager, problem solver and leader.


Pablo said...

I will say this: Even though I have my problems with Romney's specifics (I agree overall the compromise should be rejected), I find it amusing that pundits are saying that this is Romney pandering again. As you mentioned Doug, the compromise is popular, yet Romney rejects it. Same goes for his refusal to pander on TARP. Even when Romney was governor of MASS, his health care reform was initially unpopular (when it was passed). As people became aware of it, it became more popular.

This idea that Romney has not guts is without evidence.

Jonathan said...

Sorry Doug, no deal. This was the best possible deal that could happen when the GOP still does not have control of either house of the Congress. Again, our stated goal was to get the Bush Tax-cuts to be extended. We got that. Worry about restructuring our budgets when we actually are in charge of something.

illinoisguy said...

Jonathan, I hope you know I respect your opinion and appreciate the fact that you stay more civil than many of us. BUT, why do you fell this was the best we could have done? Don't you think if we would have fought very, very hard to make them permanent, we could have won just that one more point? How do you know this was the absolute limit? We won the November elections big time, and in my opinion we acted as if Obama's party won.

BOSMAN said...

I'm with Romney. We could have done better. No bill now would have been better than the half-assed one we now have.

Closer To Home said...

I could see your point, Jonathan, if we had just completed and election where we failed to secure a majority and where it would be at least another two years before we could try again.

The Republicans could have rejected the bill and promised to resubmit a permanent bill on the day the new congress convenes and dare the Senate and the president to reject it. Wall Street would take a modest hit, but would have come back even stronger in January.

Seeing as Romney has created real jobs in his life, and how he knows what directors and executives talk about in those board rooms before they make decisions to grow jobs, politicians seem a bit arrogant.

Bill589 said...

Good op-ed. Following Demint’s and Palins opposition, but Mitt is following closer lately.

Pablo - About Mitt, sometimes by ‘guts’ we mean being the first to stick your neck out, where noone knows how much ridicule and rejection is waiting. After a week or two of DeMint and Palin getting some flak, but mostly positive feedback from TPM types - it’s just not the same.

Doug NYC GOP said...

Having an itchy Twitter finger and staking out hard right positions, which you know you base will love and the Left will hate is not gutsy leadership. Where's the risk?

Palin knows how to rig the game to keep her stranglehold on her supporters. She presses the emotional buttons of the hard right and left. That's so easy to do.

If she was a true leader, she'd be showing the way to resolving problems, perhaps annoying her base along the way. That is leadership.

Gutsy indeed

Anonymous said...

If Romney had come out for this bill, THE SAME people would have been criticizing him for it.


kelly said...

I agree with zeke. The anti-Romney folks are against ANYTHING he says just because he says it.

Right Wingnut said...

Kelly and Zeke,

Not true. I'm no fan of Romney, but I agree with his postion 100%. They should have killed this thing and passed a bill on Jan 5th retroactive to Jan 1. Obama would have been forced to eat whatever Speaker Boehner served up. I also agreed with his position on New START from the beginning.

Revolution 2010 said...


Kelly and zeke are correct. If what you say is true and not pandering, you're a rarity.