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.