The core of President Obama’s campaign is built upon the fallacious idea that Mitt Romney’s plan to get the economy growing again will take us back to the policies that caused the Great Recession.
What are those policies? Well, he’s certainly talking about Mr. Romney’s belief that a chronically weak, bedridden economy that has all but stopped growing is badly in need of a stronger booster shot: specifically, federal tax cuts to spur needed capital investment, industrial expansion and business startups that would create millions of new jobs and slash unemployment.
In Mr. Obama’s confused worldview, the tax cuts enacted by President George W. Bush, along with deregulation and other pro-business policies, caused the subprime housing collapse that led to the economy’s downfall. That’s right, they’re the very same tax cuts Mr. Obama grudgingly decided to keep in place at the end of his second year in office for fear that higher tax rates would further cripple an economy that was still on the critical list.
Many actions caused the recession, but the chief culprit was a concerted effort by Democrats in Congress to lower and virtually erase mortgage eligibility standards in federal lending programs for lower-income people.
You won’t find Mr. Obama admitting that the seeds of the subprime mortgage collapse were sown by members of his own party or by homebuyers who shouldn’t have qualified for housing loans. In his left-tilted mind, it was Wall Street and the big banks that caused the economy’s collapse, not the federal government’s mortgage giants, Fannie Mae and Freddie Mac, whose bailouts have cost taxpayers tens of billions of dollars.
Yet Mr. Obama is still out there on the hustings telling voters that Mr. Romney’s economic and fiscal agenda would take us back to those days. But let’s look at what Mr. Romney is really proposing and why it is a far more effective way to make our economy healthy again.
First, he would make the Bush tax cuts permanent and thus end the last four years of business uncertainty that has paralyzed our economy. Risk-taking doesn’t happen when you don’t know from year to year if your taxes are going to shoot up to job-killing, profit-cutting levels. This would encourage economic expansion and employer hiring as well. It would unlock capital investment that has been tepid at best under Mr. Obama’s plan to raise the 15 percent capital gains tax to 20 percent or higher.
Second, Mr. Romney wants to cut tax rates further, for both businesses and the middle class. The 35 percent corporate income tax is the highest in the industrialized world and makes us less competitive in the global economy. He would cut it to 25 percent.
Mr. Obama rejects Mr. Romney’s tax-cut plan, saying it would favor the rich at the expense of the middle class and would drive up the budget deficits. But there really are just two ways to effectively cut the budget deficits, and raising taxes — as Mr. Obama proposes — is not one of them.
One way would be through stronger economic growth and a sharply reduced unemployment rate. Putting tens of millions of workers back on the income tax rolls, along with millions of new businesses, would boost federal revenues. Another way is to reduce federal spending. Mr. Romney’s plan would do both.
You do not hear Mr. Obama talk about economic growth. It’s a foreign language he doesn’t understand and never will. His approach from the beginning has been to re-create the New Deal’s failed policies from the 1930s based on the idea that government can create jobs by spending a lot of money. But his $800-billion-plus infrastructure spending plan was a spectacular and costly failure. Why? Because the politically chosen list of federal, state and local projects in which he invested touched only a relatively small part of the economy. When each contract ended and the money ran out, so did the jobs.
Permanent tax cuts are the most effective way to reach every nook and cranny of the nation’s economy. Instead of spending hundreds of billions of dollars borrowed from China and driving our government deeper into debt, lower tax rates are designed to flow throughout our economy’s bloodstream like a fast-acting antibiotic.
Mr. Obama and his Democratic allies insist that it will not work, but we have at least three examples of when it did work with spectacularly good results — two of them under Democratic presidents.
President Kennedy’s across-the-board income tax cuts in the 1960s met with strong opposition from naysayers who insisted, like Mr. Obama, that they would worsen the deficits. By the end of the ‘60s, however, increased tax revenues had led to a budget surplus and a stronger economy.
Like Mr. Obama, President Reagan inherited a recession-battered economy, though he faced higher unemployment (10.8 percent at its peak). He, too, cut taxes across the board, and the economy began to recover after two years. When he sought re-election in 1984, the economy was growing at 6.3 percent and the unemployment rate had fallen to 7.3 percent. He carried 49 states.
Bill Clinton never utters a word about the GOP bill cutting capital gains taxes that he signed in his second term to spur new investment, but economists widely credit the bill for the soaring tech-driven economy that followed — pushing the unemployment rate down to 4 percent.
Mr. Romney’s recovery plan contains other pro-growth components, too. Among them: doubling U.S. exports by ending Mr. Obama’s moratorium on new trade agreements; lifting Mr. Obama’s blockade of the oil pipeline from Canada that would have created 20,000 jobs; and ending offshore limits on oil and gas exploration to boost energy supplies and flatten gas prices.
Meantime, does anyone know what Mr. Obama’s agenda would be in a second term? He certainly did not offer any specific plans in his convention address to get the U.S. economy growing again. “If Mr. Obama has a plan, Americans who listened don’t know how he would achieve it,” The Washington Post said in an editorial.
Instead, Mr. Obama offers us more of what we’ve seen in the past four years: a mediocre economy and ever higher unemployment. Had enough?
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.