How His Economic Proposals Depend on the Failed Bush Strategy of Enriching the Wealthy at the Expense of Everyone Else
SOURCE:
AP/Charles Dharapak
Republican presidential candidate and former
Massachusetts Gov. Mitt Romney pauses while speaking about the Supreme
Court's health care ruling in Washington.
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Endnotes and citations can be found in the pdf version of this report.
It is no exaggeration to say that the linchpin of former
Massachusetts Gov. Mitt Romney’s economic strategy is to further enrich
the richest 1 percent of Americans. Nearly every element of his economic
agenda revolves around what would be good for the richest people and
the biggest corporations in the United States. This shouldn’t truly
surprise anyone. His approach is very much in line with the dominant
conservative economic theory of the last three decades, “supply-side
economics,” and shares numerous characteristics with the economic
policies of the George W. Bush administration.
Indeed, there is little, if anything, in the economic agenda of the
current Republican presidential aspirant that would be considered
particularly revolutionary among adherents of the supply-side theory.
But what is notable is the degree to which Gov. Romney doubles down on
that theory and on the policies of President George W. Bush to produce a
plan that would dramatically favor the very rich over the interests of
everyone else. It’s especially notable given how badly that theory and
those policies fared during the past decade.
Supply-side economic theory holds that the best way to ensure
prosperity is to, as much as possible, minimize taxation and government
regulation on those who (in the view of supply-side theorists) are the
most likely to produce growth: the rich. The often-used epithet,
“trickle-down economics” is actually not far off from the central idea
of supply-side theory. Reward wealth, allow the rich the freedom to use
their money as they see fit, give corporations a free hand in how they
treat their workers and customers and the result will be eventual
prosperity for everyone. This idea is why adherents of supply-side
theory so often like refer to rich people as “job creators.” They
honestly believe it.
The problem for supply-siders in general, and for Gov. Romney in
particular, is that we have repeatedly tried using their policies and
those policies have repeatedly failed—and rather spectacularly at that.
The presidency of George W. Bush is, of course, the prime example. By
almost any standard, economic performance under President Bush was
awful, especially compared to his predecessor President Bill Clinton,
who, in direct contravention to his supply-side critics, raised taxes on
the rich. In fact, economic performance under President Clinton
outpaced even that of the patron saint of supply-side theory: President
Ronald Reagan.
The empirical evidence is very clear. Supply-side theory may sound
good on paper, but it hasn’t worked in practice. Instead of prosperity
trickling down, wealth seems to flow up.
Unfortunately, Gov. Romney does not appear to have taken any lessons
from the Clinton and Bush presidencies. Instead, his economic plan is
chock-full of policies that will make the very rich—and by extension,
supply-siders—very happy.
This report takes a close look at the core of Gov. Romney’s economic
agenda and describes just how just how targeted it is for the benefit of
the few at the expense of the many in our nation. In brief, Gov.
Romney’s plan for the economy can be summed up in four main points. His
plan is built on:
- A tax plan solely for the 1 percent, raising taxes on nearly everyone else
- Massive yet unspecified spending cuts that threaten our economic competitiveness, future prosperity, and public safety
- Fiscal policies that will only exacerbate our federal budget challenges
- Extreme plans to exempt businesses from adhering to the most
basic safety, health, environmental, and workplace rules and regulations
A tax plan solely for the 1 percent
The key element of any good supply-side economic plan is lower taxes
for the rich and Gov. Romney’s blueprint absolutely delivers. The main
element of his tax proposals consists of massive cuts for those at the
very top. The total magnitude of the Romney tax cuts exceeds even that
of the Bush tax cuts, a fact made all the more startling when you
realize that Gov. Romney wants his new tax cuts
in addition to, not instead of, the Bush tax cuts.
The Romney tax plan also reflects an unfortunate corollary of
supply-side’s main argument—since the rich are the key to prosperity,
everyone else doesn’t matter very much. In essence, supply-siders
believe while tax cuts for everyone would be nice, it’s really only the
ones for the top that matter. Though Gov. Romney’s specific proposals
would, in fact, give everyone a tax cut, he has also promised to keep
overall revenues where they were under President George W. Bush’s tax
policies. Though Gov. Romney declines to explain how he would accomplish
this feat, under any reasonable assumptions (and even most unreasonable
ones) taxes for the middle class would have to go up.
The Republican presidential candidate’s tax plan, therefore, is a
perfect illustration of supply-side theory—dramatically lower taxes for
the rich, higher taxes for everyone else.
Promises of massive unspecified spending cuts
Gov. Romney combines his specific tax cut proposals with promises of
extremely vague spending cuts. Instead of detailing which programs
should be reduced or eliminated and which should be maintained, he sets
forth a broad target for federal spending: 20 percent of gross domestic
product, the broadest measure of overall economic activity. Gov. Romney
proposes a handful of specific spending cuts but by and large, he
declines to explain how he would meet that target.
Unfortunately for the vast majority of Americans, the only way for a
Romney administration to hit that target would be to implement massive
cuts to most services, programs, benefits, and government
assistance—everything from air traffic controllers to food safety
inspectors, federal funding for education to investments in basic
research and development, as well as a variety of assistance programs
that enable low-income Americans to grasp a hand up into the middle
class. And though Gov. Romney says he wants to protect Social Security
and Medicare for current retirees and those soon to enter retirement,
the math simply won’t work. Gov. Romney’s spending cap will, sooner or
later, lead to enormous cuts for those two programs as well.
Rhetoric about fiscal responsibility, but policies that lead to more debt
The age of permanent federal budget deficits started with the first
supply-side president, Ronald Reagan, and accelerated with the last one,
George W. Bush. Gov. Romney’s policies promise another round of
supply-side budgeting: big tax cuts financed by more debt. Gov. Romney
certainly embraces the rhetoric of fiscal responsibility—as, of course,
did President Bush—but the actual policies he proposes would inexorably
lead to more debt.
An extreme deregulation agenda
After low taxes for the rich, the second tenet of faith among the
followers of supply-side theories is that corporations must be as free
as possible from regulation and oversight. Gov. Romney’s plan embraces
that ethos with gusto. His agenda includes proposals to repeal existing
regulations, to make it nearly impossible to enact any new regulations,
and to allow the executive branch to decline to implement any new rules
or requirements that Congress does manage to pass. Gov. Romney also
proposes to roll back many environmental regulations and worker
protections.
Combined with spending policies that would inevitably slash the
operation budgets of many regulatory agencies, Gov. Romney’s
deregulation agenda would effectively give corporations nearly free
reign. These policies flow from the belief that what’s good for the
bottom lines of the Fortune 500 is necessarily good for everyone. They
decidedly reject the notion that fair and efficient markets depend on a
level playing field, clear rules, and impartial referees.
Understanding Romney’s economic worldview
Each of these elements in Gov. Romney’s economic policy proposals, in
their own way, seeks to bolster those at the top. After all, that is
the underlying premise of supply-side economic theory. Tax cuts that are
paid for with middle-class tax hikes and cuts to middle-class programs
or else not paid for at all—leaving it to future generations of
Americans to pay off the debt. Less oversight of corporations and fewer
rules about how those corporations can treat their customers, workers,
and even shareholders.
And just as it shouldn’t be terribly surprising that Gov. Romney’s
economic plan is a reflection of supply-side theory, it also shouldn’t
surprise us when that plan fails to generate growth. After 30 years of
economic experimentation, we know that a focus on the rich doesn’t yield
broad prosperity; it only results in more inequality. Instead, a
growing body of economic research points to very different ingredients
for growth, chief among them a strong middle class.
But Gov. Romney doesn’t have a plan for a strong middle class. Quite
the opposite. The middle class would have to pay, one way or the other,
for the enormous tax cuts he promises to deliver to the rich. Average
Americans would also have to shoulder the burden of any deficit
reduction that occurs under a Romney administration. Middle-class
workers and those aspiring to join the middle class benefit from the
labor standards and fair pay laws and regulations that Gov. Romney would
like to see scaled back or eliminated. It is the 99 percent who depend
on the environmental protections that Gov. Romney thinks are “job
killers.” And it’s largely the middle class who will be asked to pick up
the tab when Wall Street inevitably gets in trouble again after Romney
repeals the financial reforms enacted in the wake of the housing and
financial crises that nearly brought the world economy tumbling down.
Ultimately, Gov. Romney’s economic policies are heavily tilted toward
the rich and corporations because that’s who he thinks are important
for economic growth. The result of implementing those policies would be
higher costs, fewer services, and weaker protections for the middle
class as well as for lower-income Americans aspiring to the middle
class. Gov. Romney believes that the positive effects of lower taxes for
the rich and looser regulations for big businesses will more than
offset the increased burden for the middle class. Both recent history
and empirical economic evidence demonstrate why he’s wrong.
Michael Linden is the Director for Tax and Budget Policy, Seth
Hanlon is the Director of Fiscal Policy, Jennifer Erickson is the
Director of Competitiveness and Economic Growth, Gadi Dechter is the
Managing Director for Economic Policy, Adam Hersh is an economist with
the Economic Policy team, and Karla Walter is a Senior Policy Analyst at
the Center for American Progress Action Fund.
Download this report (pdf)
Download this introduction and summary (pdf)
Endnotes and citations can be found in the pdf version of this report.
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