An illuminating discussion on Meet the Press for Mitt Romney.  This is the first time Romney has been on Meet the Press since he started running for the 2012 presidency.  I look at 5 different areas that Romney discussed on MTP: the economy, healthcare, “Bin Laden is Dead, GM Is Alive”, Romney’s tax plan and defense spending.

Romney has changed his position apparently on Healthcare in a pretty big change from prior stances that he has taken. He flatly denied his prior position on defense spending even though it is thoroughly documented on the record, he blames Obama for everything bad on the economy and gives the FED credit for everything good, he falsely claims that his plan to “Let Detroit go Bankrupt” would have saved GM faster and he references studies by Princeton and Harvard to support his claims that he won’t raise taxes on the middle class even though it is mathematically impossible for his plan to work.

For a man who claims that he will tell the “hard truths” … I find it interesting how he promises everyone they get everything and there will be no pain.  He’s going to give everyone a tax cut and magically it will fix the economy and he promises that it will pay for itself.  He’s going to keep the good stuff in Obamacare but wont’ say how he is going to pay for it.

The Economy
David Gregory challenges Romney on his campaign’s claim that under a President Romney – the economy would grow 12 million jobs.  David Gregory points out that independent reports show the next 4 years will lead to 12 million new jobs “no matter who is President”.  He then asks “Doesn’t that suggest that the President and his team has laid a foundation for that kind of growth to occur?” and doesn’t that mean the  economy is “primed” for an economic recovery.

Romney response was simply to keep hammering on the # of months unemployment has been over 8% and talks about a shrinking job market under Obama.  And then when he refers to the stock market he says “of course the stock market does well in part because the indication by the FED that they’re going to print more money, put more money in the system.”

So all the problems are Obama’s fault and any of the good things can be attributed to the Federal Reserve.  And apparently – the shrinking labor participation has nothing to do with the baby boomer generation retiring and everything to do with President Obama’s policies.  He even insinuated that there would be a coming wave of inflation even though inflation today is lower than it has been under President Bush by significant margins.  Inflation is below 2%.

But as Ezra Klein points out regarding the shrinking labor force HERE:

But since 2000, the labor force rate has been steadily declining as the baby-boom generation has been retiring. Because of this, the Federal Reserve Bank of Chicago expects the labor force participation rate to be lower in 2020 than it is today, regardless of how well the economy does.

In a March report titled “Dispelling an Urban Legend,” Dean Maki, an economist at Barclays Capital, found that demographics accounted for a majority of the drop in the participation rate since 2002.

And let me remind you that the Great Depression was a DEFLATIONARY event.  Deflation kills the economy and helps the rich.  It is a death spiral.  Inflation at or around 3% is what we need until the economy goes back into full gear at which point 2% is a great target.  Look at how high inflation is below – the blue line shows inflation is actually at its lowest level in a very, very long time.  That inflation is what is helping the stock market according to Romney.  Got it?

Healthcare

Romney changes his stance on Obamacare.  Historically – he always said he would eliminate it from Day 1.  Now he says that he is going to keep the “good parts” of Obamacare.  He includes being able to stay on your parents insurance “to whatever age you want”, eliminating pre-existing conditions and companies being able to receive tax deductions for offering healthcare as being the “good parts”.  And he has yet to provide an actual plan on what he would replace it with.  Except all of these things cost money; they’re going to cost someone something.  Romney seems to make the claim that he is now making a big shift on his claims with eliminating pre-existing conditions.

Governor Romney public position has been this:

“Governor Romney supports reforms to protect those with pre-existing conditions from being denied access to a health plan while they have continuous coverage.”

And as Sarah Kliff at the Washington Post explains HERE:

Policy-wise, however, there’s a significant amount of space between “ending pre-existing conditions” and “ending pre-existing conditions [with continuous coverage].” Under the former scheme, insurers cannot deny coverage to an individual — no matter what. Under the latter, insurers can, in certain situations, refuse to cover some individuals.

The idea of “continuous coverage” is pretty much what it sounds like: Under the scheme Saul laid out earlier, an individual who kept buying insurance month after month could not be turned away by an insurance company. The goal is to create an incentive for healthy people, who don’t think they really need coverage, to keep paying monthly premiums — ensuring that they would have access to health insurance if their health should take a turn for the worse.

In other words – simply eliminating pre-existing conditions for continuous coverage would really be the status quo of what we already had anyway.  And Romney either said something misleading or he has etch-a-sketched his position into a new position.  And he hasn’t said how he would pay for it because these types of things aren’t free.

This is what Romney had to say about Obamacare when the Supreme Court ruled it was constitutional.  He doesn’t mention any support for any part of Obamacare.  He simply wants to eliminate it and basically go back to the status quo.

Bin Laden is Dead, GM is Alive
David Gregory asks Romney why the “Bin Laden is Dead, GM is Alive” theme is not a good bumper sticker.  He gives credit to President Obama for the decision to take out Bin Laden.  Rightly so.  He then claims regarding GM that he believes his view that GM should have gone into bankruptcy 6 months earlier than it did and that “the President resisted” that.  He said that his plan was to “let them go into bankruptcy, help them come out but let them go in.”

Except Romney’s plan to “Let Detroit go bankrupt” would have led to the liquidation of those car companies; they didn’t have the money to fund operations and had no access to credit.  Here is what Romney is criticizing regarding President Obama’s plan:

And this is what Romney wrote in an Op-Ed at the height of the crisis:

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

As we shared HERE – the Economist wrote:

Free-marketeers that we are, The Economist agreed with Mr Romney at the time. But we later apologised for that position. “Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk”, we said. But “given the panic that gripped private purse-strings…it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended.”

Even Ford, which avoided bankruptcy, feared the industry would collapse if GM went down. At the time that seemed like a real possibility. The credit markets were bone-dry, making the privately financed bankruptcy that Mr Romney favoured improbable. He conveniently ignores this bit of history in claiming to have been right all along.

And even though companies like Bain Capital wouldn’t even provide financing to GM and Chrysler – but Mitt Romney took credit for the turnaround somehow HERE:

“I pushed the idea of a managed bankruptcy.  And finally, when that was done, and help was given, the companies got back on their feet.  So I’ll take a lot of credit for the fact that this industry’s come back.”

David Gregory then asks what is the bumper sticker for Romney/Ryan … here it goes:

“You want more jobs, you want higher income, then vote for Romney and Ryan”

That’s longer than I expected.

The Romney Tax Plan


Romney claims that his plan will “keep the progressivity” of the current tax code by cutting taxes on everyone by 20% but just eliminating tax deductions.  Romney won’t say where he’ll cut deductions.  He claims that there are studies that find his tax plan will balance out and not raise taxes on the middle class.  David Gregory asks him for specifics … but he doesn’t give ANY specifics in the interview.  NONE.  He won’t give even ONE example of a deduction that he’ll close.  He is asked several times but doesn’t answer the question.

And let’s be clear – you do not increase spending by simply reducing marginal rates unless the net-net leads to a tax cut.  If someone is used to paying 15% but their marginal rate is 20% and you eliminate deductions so that they pay 15% net-net like they always have … that will not lead to more spending by that individual.  There are some other benefits but it doesn’t increase spending by that individual because their take home pay is the same and no more money is put into the system to drive economic growth.  So the Romney plan is built off of a complete sham of an idea.

You can find the review of Romney’s tax plan by Harvey Rosen at Princeton HERE and from Martin Feldstein at Harvard writing in an op-ed in the Wall Street Journal HERE.  It is total smoke and mirrors.

First off – both studies assume by simply cutting marginal rates that individual take home pay will increase by 3% or 5% because … just because.  Secondly – both studies focus only on people making over $100k a year.  They do NOT focus on the top 1% of incomes.

In the Princeton study of Romney’s tax plan … Mr. Rosen says you have to assume that people will make more under Romney’s plan and he assumes that Americans see an increase in income under the Romney tax plan of 3%.  Well that’s quite an assumption.  When Bush pushed for tax cuts for the rich in 2001 and 2003 – they used a technique called “dynamic scoring” where one must assume that the plan increases revenues and thus tax cuts lead to more revenue for the treasury.  Well – we all know how that turned out.  The Bush tax cuts are the #1 source of the deficit we have today (source).

Martin Feldstein at Harvard even admits, “It is impossible to calculate the exact effects of the future reforms since Gov. Romney hasn’t specified what he would do.”  Mr. Feldstein also acknowledges that the top 20% of incomes total to $636 billion in deductions in 2009 #’s.

So the government has to eliminate $636 billion in deductions below in order to be revenue neutral.  But the bottom 80% of incomes would be affected if you did.  But Mr. Feldstein says if you simply cut the marginal rates that somehow magically the Treasury will gain $191 billion in tax revenues.  Except this is ridiculous because the $191 billion in tax revenues would not happen.  He assumes that incomes in the top 20% would average out with 30% marginal rates and that is simply not factual.  People making $100k a year are not in the 35% marginal tax rate bracket.

But as we have shared HERE - you can see a list of all the deductions available to every American and how much they cost.

And for the 1% of richest Americans … it becomes even more impossible for him to prove that these numbers work out.  Both Mr. Rosen and Mr. Feldstein assume that the Romney tax plan will increase personal incomes by 3 to 5% for the top 20% of earners (people making over $100k).  If you zero in on the top 1% of incomes alone and try to reduce their marginal rates from 35% to 28% – you have to find a way to cover the difference by eliminating tax deductions only for the rich.  You can’t.  Eliminating deductions like reducing the rate on dividends and capital gains would be necessary but that deduction primarily benefits the richest Americans.  Same for exclusion of capital gains at death.  That benefits the richest Americans.

But as the Washington Post explained the non-partisan Brookings institute study HERE:

“It is not mathematically possible to design a revenue-neutral plan that preserves current incentives for savings and investment and that does not result in a net tax cut for high-income taxpayers and a net tax increase for lower- and/or middle-income taxpayers,” the study concludes.

Even if tax breaks “are eliminated in a way designed to make the resulting tax system as progressive as possible, there would still be a shift in the tax burden of roughly $86 billion [a year] from those making over $200,000 to those making less” than that.

What would that mean for the average tax bill? Millionaires would get an $87,000 tax cut, the study says. But for 95 percent of the population, taxes would go up by about 1.2 percent, an average of $500 a year.

Defense Spending

David Gregory challenged Mitt Romney on his plan to increase spending on the military to even greater levels.  Romney said he wanted to keep military spending at current levels.  But that’s not what he has proposed in the past – big surprise … he’s changing his stance.  Romney has taken the stance that he wants defense spending to be 4% of GDP … so as the private economy grows – he wants to see defense spending increase as well.  He is thoroughly on record for saying this but now he says … not so much.  And most importantly – he doesn’t say who is going to pay for it.

This chart showcases the differences between what we currently spend on the military….and what the military budget would look like under Romney’s proposal.  Says the National Interest:

Now consider how this compares with the recent past. As you can see, Romney’s 4 percent gimmick would result in taxpayers spending more than twice as much on the Pentagon as in 2000 (111 percent higher, to be precise) and 45 percent more than in 1985, the height of the Reagan buildup. Over the next ten years, Romney’s annual spending (in constant dollars) for the Pentagon would average 64 percent higher than annual post–Cold War budgets (1990-2012), and 42 percent more than the average during the Reagan era (1981-1989).

CNN has another chart on Romney’s plans on defense spending HERE:

But in one budget area, Romney is running the opposite direction. The former Massachusetts governor wants to increase defense spending by leaps and bounds. By one estimate, additional spending would exceed $2 trillion over the next decade.

Romney’s plan calls for linking the Pentagon’s base budget to Gross Domestic Product, and allowing the military to spend at least $4 dollars out of every $100 the American economy produces.

With the Pentagon’s base budget — which does not include war costs — forecast to hit 3.5% of GDP in 2013, a jump to 4% would mean an increase of around $100 billion dollars in defense spending in 2013.

The additional spending really piles up in future years.

You can see other explanations of the Romney plan to increase defense spending HERE and HERE.  

Romney then goes on to say that President Obama is trying to cut defense spending but fails to mention the reason for looming defense cuts.  Romney says:

“I thought it was a mistake on the part of the White House to propose [the defense cuts]. I think it was a mistake for Republicans to go along with it.”

Well – a few things on that:

#1 – His running mate – Paul Ryan – voted for it.

#2 – Republicans FORCED this deal when they tried to hold the economy hostage by threatening not to raise the debt ceiling for the first time in history.  Raising the debt ceiling does not approve spending … it simply authorizes the government to pay for bills Congress has already committed to.

#3 – Defense cuts would not be necessary if Republicans would be willing to negotiate on some deal that would help cut the deficit by $1.2 trillion over 10 years.

Bottom line – Republicans wanted to play tough on cutting spending but would not entertain increasing taxes on the wealthy.  So – Congressional leaders negotiated painful cuts that would automatically take effect if both parties failed to reach a compromise to trim $1.2 trillion off the deficit over 10 years.  President Obama offered 3 options to the Republicans and they simply avoided trying to come to terms on some deal to cut spending in order to make President Obama look bad and because they were not willing to increase taxes on the wealthy.

You can read more about the looming fiscal cliff and the sequestration cuts set to take effect HERE.  And Romney is criticizing the President for something that his own running mate voted for.  That’s brilliant.

And Romney readily acknowledges that balancing the budget in the next four years would put the economy back into a recession – he sets a goal of 8 to 10 years.

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