30 Oct The Economic Implications of the Impending Election
The below piece represents a rough transcription of the speech I recently delivered to the annual donor’s conference of the Center for Cultural Leadership in northern California. For more information on the Center, where I serve as Senior Fellow of Economics and Finance, please click here.
I have written of and spoken about many, many reasons that Barack Obama must be removed from office. I am uncompromising in my advocacy of a Mitt Romney Presidency, and excited for and optimistic about that very prospect. I want to provide the economic implications of the impending election, and use these to reinforce the need for a Romney election and Obama removal.
It is tough to do with precision, but consider this list a “top five” list in the reverse order of importance.
#5 – Trade and Protectionism
I should say that much of Gov. Romney’s rhetoric on this issue has been concerning as well, but I do take comfort in the fact that I do not believe he really means it. Labeling China a currency-manipulator has some prima facie merit to it, but carries large risks as well. I do not really believe that Romney is going to start a trade war. However, the trade policies of Barack Obama are essentially better titled “union cronyism”, as is the bulk of his first term agenda. Whether it be private market labor unions or the public employee unions, Obama’s trade policies are driven by a rank pandering to the #1 constituency of the Democratic Party – unions. His stimulus failed the way it did because there was nothing stimulative about it (NOTE: As a non-Keynesian, I reject on its face that any manipulation of government spending could ever be the optimal allocation of resources, no matter what the short term effects may be; however, even I acknowledge that $1 trillion of government spending should have done SOMETHING to drive economic GDP growth – it didn’t, because the stimulus was a $1 trillion payoff to municipal unions). My belief is that Obama is largely disinterested in a discussion about free trade, about the possibilities that exist in opening more trade routes with Latin America, and in a general conversation about globalization. What he is interested in is protectionism, and not because of a broad (but misguided) concern for American manufacturers (like Pat Buchannan’s economic mistakes), but rather a protectionism that seeks to protect union interests above all else. This is a big deal, and a clear advantage for Romney.
#4 – Energy
I feel guilty making this the #4 item, because it is a really, really big deal. The next internet growth explosion – the next massive game-changer in the economy – the next historical milestone our nation’s prosperity could reach – are all in the areas of oil and gas. We have the capability to unleash a boom that would rival any economic opportunity the world has ever seen, and it is being suffocated right now by radical environmental extremism and green energy cronyism – both core pieces of the ideology of Barack Obama. Elect Mitt Romney President, and you will see a natural gas boom that will change the world.
#3 – Tax Policy
We do not know exactly what a Barack Obama re-election would mean to tax rates, but we do know what he intends it to mean: Higher rates for capital gains, dividends, and ordinary income. One may argue that he does not want to raise the rates on capital gains and dividends for middle class people and poor people, but I will remind you that middle class people and poor people do not receive capital gains and dividends. To increase taxation on investment in this country with GDP growth less than 2% annually is, at best, economic foolishness, and at worst, treason. But let’s not leave this with only a mention of investment rates, for the ordinary income rates we hear discussed so much in the press are quite possible the end of the world. If you tax more of something, you get less of it (let me know if I have gone over your head). If what we want is income and productivity and growth, to tax it more on the margin is an antidote to economic growth. Romney’s tax plan is politically acceptable, which means I wish it went further, but what I want is not yet politically acceptable. Therefore a flattening of tax rates, reforming of deductions, and simplification of the code is the best thing we could hope for, and it is something Romney WILL get done early in his Presidency.
#2 – The Budget and National Debt
From a policy standpoint, this is the most important issue (you will see below that point #1 is not policy related). Our country exists right now in a race against the bond market – period. We are holding together because the bond market has been gracious enough to keep our ten-year rate below 2%. This is happening because the Federal Reserve is the biggest buyer of treasury debt, and because much of the rest of the world is in a worse economic position than us. No credible economist believes that we can continue this game much longer, and if the federal budget deficit is not reduced before the bond vigilantes surface, we are going to be Greece before one can say “pass the souvlaki” … The Romney/Ryan plan is credible, intelligent, do-able, and effective. Any discussion of the national budget that does not feature significant entitlement reform is not to be taken seriously. Romney and Ryan will do what Obama has steadfastly refused to do: Treat the nation’s fiscal situation with grown-up attention.
#1 – The Tone, Rhetoric, and Mood Regarding Business and Growth
I understand that this may seem less important than the crucial policy issues I address above, but it is not. More than anything else, my vitriol for the current President comes from his vitriol for business and prosperity. He has set a tone in nearly every press conference he has ever hosted that amounts to a sickening embrace of class warfare. To deny that businesses (both big and small) have held back investing in capital goods, or taking risks, or deploying cash, or expanding their work force partially because of the tone they have seen from the White House (a climate of demonization) is to be living in severe denial. The entrepreneur in America needs to know that he is not seen by his government as an enemy. Businessmen and women in America “did build that”, and the economic engines that could be revved up by a President who doesn’t assert otherwise are fantastic to think about.
A President Romney will not have America in a budget surplus in four years, but he will reverse the trend of the annual budget deficit in a significant and meaningful way. He will not fully right size the federal government, but he will reduce it. He will move the ball in the right direction, and change the tenor of economic discourse in this country. The economic stakes in this election could not be larger, and the choice could not be clearer.