Some critics of Mitt Romney complain that he has no plan to turn around our faltering economy. Others, like President Obama, claim that Romney’s economic policies have been tried and found wanting. Neither contention withstands scrutiny.
Glenn Hubbard, the Romney campaign’s economic adviser, explained the basic contours of Romney’s economic plan in today’s Wall Street Journal. The program, which will not come as a surprise to those who have been paying attention, has four main components:
• Stop runaway federal spending and debt. The governor’s plan would reduce federal spending as a share of GDP to 20%—its pre-crisis average—by 2016. This would dramatically reduce policy uncertainty over the need for future tax increases, thus increasing business and consumer confidence.
• Reform the nation’s tax code to increase growth and job creation. The Romney plan would reduce individual marginal income tax rates across the board by 20%, while keeping current low tax rates on dividends and capital gains. The governor would also reduce the corporate income tax rate—the highest in the world—to 25%. In addition, he would broaden the tax base to ensure that tax reform is revenue-neutral.
• Reform entitlement programs to ensure their viability. The Romney plan would gradually reduce growth in Social Security and Medicare benefits for more affluent seniors and give more choice in Medicare programs and benefits to improve value in health-care spending. It would also block grant the Medicaid program to states to enable experimentation that might better serve recipients.
• Make growth and cost-benefit analysis important features of regulation. The governor’s plan would remove regulatory impediments to energy production and innovation that raise costs to consumers and limit new job creation. He would also work with Congress toward repealing and replacing the costly and burdensome Dodd–Frank legislation and the Patient Protection and Affordable Care Act. The Romney alternatives will emphasize better financial regulation and market-oriented, patient-centered health-care reform.
Contrary to Obama’s assertion, this program has not been tried and found wanting. President Bush did not reduce federal spending as a portion of GDP. On the tax side, he did not reform the tax code to broaden the tax base. He did lower rates, and this stimulated the economy, just as occurred when Presidents Kennedy and Reagan did the same thing.
Bush wanted to reform social security, but was unable to do so. On the Medicare side, he attempted no reform.
Finally, until Obama, there was no Dodd-Frank or Obamacare legislation to repeal. Nor, to my knowledge, did previous presidents remove the regulatory impediments to energy production and innovation that Romney has mind.
In contrast to the sclerosis and joblessness of the past three years, the Romney plan offers an economic U-turn in ideas and choices. When bolstered by sound trade, education, energy and monetary policy, the Romney reform program is expected by the governor’s economic advisers to increase GDP growth by between 0.5% and 1% per year over the next decade. It should also speed up the current recovery, enabling the private sector to create 200,000 to 300,000 jobs per month, or about 12 million new jobs in a Romney first term, and millions more after that due to the plan’s long-run growth effects.
But these gains aren’t just about numbers, as important as those numbers are. The Romney approach will restore confidence in America’s economic future and make America once again a place to invest and grow.