Monday, March 12, 2012

Why is it assumed that Romney would be good for the economy?

While campaigning, Mitt Romney likes to sell himself as a "government CEO", claiming that he balanced the budget in Massachusetts without raising taxes, while reducing spending and building a "rainy-day" fund. However, for someone with presumed business acumen and fiscal-conservative credentials, who says he understands how to create jobs and what businesses need from the government, the Governor seems to have some trouble with math and black-and-white facts.

One of Romney's top surrogates – Virginia Governor Bob McDonnell – just appeared this week on NBC's Meet the Press, proclaiming that "this election is about jobs, economic development, taxes, spending, debt and deficit."

Unfortunately, the record shows that Romney failed to deliver jobs, business development and economic growth, while increasing taxes and spending. If this election is about the economy, why is it assumed that Romney is the best candidate for those issues, considering his poor record leading Massachusetts?

During Romney's watch (January 2003 to January 2007), Massachusetts spending increased at a rate even higher than the increasing size of the federal government. At the same time, Massachusetts' economy did not do nearly as well as the rest of the country.

Spending rose by 22.2% from Romney's first budget (Fiscal Year 2004) until his final budget (Fiscal Year 2007):
Fiscal Year




According to data from the U.S. Department of Commerce Bureau of Economic Analysis, the Massachusetts GDP during Romney's administration increased by only 13.8%:


(in millions)

During a similar time period, federal outlays increased by 19.0%, while national GDP increased by 18.7%:
(in millions)
(in billions)

Under Romney, Massachusetts underperformed the rest of the nation in terms of job growth. According to data from the U.S. Department of Labor Bureau of Labor Statistics, from January 2003 through December 2006, the national total nonfarm employment increased from 130,270,000 to 136,882,000 – seasonally adjusted. That's an increase of 5.1% and 6,612,000 total jobs.

At the same time, the Massachusetts total nonfarm employment increased from 3,224,600 to 3,263,900 – seasonally adjusted. That's an increase of only 1.2% and 39,300 total jobs. So, Massachusetts only accounted for 0.6% of the nation's job growth during Romney's term as Governor. That's pretty embarrassing for a state with a little more than 2% of the nation's population (as of the 2000 and 2010 census).

In December 2006, Romney was a lame-duck preparing to form his presidential exploratory committee; at the same time, MassINC, an independent think tank to promote a public agenda for the middle class in Massachusetts, was publishing a report on the labor supply and economic future of the state's economy.

The MassINC report found that in the beginning of the decade, before Romney's stint as Governor, Massachusetts resident labor force "did not grow at all," and the state ranked 48th out of 50. Unfortunately, Romney's policies made the situation worse, and from 2003-2005 the labor force contracted by 1.7% - "the only state in the nation to decline each year during this time period" – and Massachusetts exported 120,000 workers to other states. He was unable to slow down the outmigration of young, well-educated professionals, and at the end of his term there were still "important questions about the attractiveness of Massachusetts as a place to live and work, especially for those who have choices."

As governor, Romney had no trouble with putting his need to find new revenues ahead of the long-standing conservative philosophy that tax increases impede job growth, instead of making the necessary decisions to cut spending and reduce the size of government. Michael Barbaro writes in the New York Times last October:
Much of the business community in Massachusetts was puzzled. Mitt Romney, a Republican with high-caliber corporate credentials, had run for governor pledging to sweep aside barriers to business and act as the state's "top salesman."
But just a few months after Mr. Romney took office in 2003, what he delivered seemed anything but friendly to the C.E.O. crowd: a bill to financial firms for what they saw as $110 million in new corporate taxes — and a promise of more to come.
For the next three years, the Romney administration relentlessly scoured the tax code for more loopholes, extracting hundreds of millions of corporate dollars to help close budget gaps in a state with a struggling economy.
Today Mr. Romney rarely, if ever, discusses on the campaign trail how he closed the Massachusetts tax loopholes. There is no proud description of them in his two books, even though many lawmakers in the state consider them a rare show of political courage.
The Democratic-controlled Legislature, which had assumed that Mr. Romney was cozy with the state's corporate executives, was both taken aback and thrilled by the onslaught.
To many chief executives and business groups, it showed something else: a curious insensitivity to the needs of corporations and a willingness to squeeze as much money as possible out of a politically convenient target.
By the end of Mr. Romney's term, the loophole measures required companies to pay about $370 million a year in additional taxes, a nearly 20 percent increase from the period before he took office, according to an analysis of government data by the Massachusetts Taxpayers Foundation, a nonprofit research group that receives financing from corporations.
The impact of closing the loopholes, which produced a relatively small fraction of state revenues, is an open question. "It cost us jobs," said David G. Tuerck, an economist at Suffolk University in Boston, though others say that is difficult to measure and subject to debate. During Mr. Romney's tenure, Massachusetts ranked near the bottom — 47th out of 50 states — in new job creation.
In a 2005 newsletter, the Council on State Taxation, which represents businesses, mocked "the allegedly pro-business" Mr. Romney for trying to "firmly reclaim for the commonwealth the dubious title of Taxachusetts."

Massachusetts' business tax climate ranked 36th in the nation at the start of fiscal year 2007, according to the Tax Foundation. Specifically, the corporate tax index component of the state's business tax climate was ranked 47th in the country, ahead of only Delaware, New Hampshire, and Michigan.

Anti-tax advocates, like the Cato Institute, the Massachusetts Taxpayers Foundation, the National Taxpayers Union, and Citizens for Limited Taxation, did not see evidence that Romney was a tax cutter.
Cato found that Romney increased annual state fees by $500 million as governor and proposed two corporate tax increases totaling close to $400 million a year.
"Romney's people are trying to spin this by saying he kept his 'No new taxes' pledge," said Stephen Slivinski, director of budget studies at Cato. "I guess if you consider only personal income taxes and sales taxes, he's within bounds. If you take a broader view, he is not.
"The spirit of [anti-tax pledges] is to force governors to find more innovative ways of funding government," he added. "If the spirit is to save money before you increase revenues, I don't think Romney has held to the spirit of the no-new-tax pledge."
John Berthoud, president of the National Taxpayers Union, retorted, "Closing tax loopholes and not cutting rates concurrently — that's a tax increase. The loopholes business is sometimes patina to make it seem like it's not really an increase."

The Club for Growth, who is also committed to lower tax rates that encourage greater economic growth, notes that Romney "had a mixed record on taxes."
While it is true that Governor Romney did not impose any broad-based tax hikes despite pressure from liberal special interests and an inherited budget deficit, he imposed a slew of fee hikes and tax "loophole" closures, together with spending cuts, in order to eliminate the budget gap.

According to calculations of the combined state-local tax burden by the Tax Foundation during Romney's term, per capita taxes paid increased by 13.2% and Massachusetts' burden ranked in the worst quartile (on average) amongst the other states:

Tax Burden

Per Capita Taxes
Paid to Massachusetts

A report in October 2006 by the Cato Institute presents the findings of their fiscal policy report card on the nation's governors. Two months away from the end of his term, Romney received an overall score of 55 and a grade of "C". His spending score was a 50 (grade of "C") and his tax score was a 60 (grade of "C").
Romney likes to advance the image of himself as a governor who has fought a liberal Democratic legislature on various fronts. That's mostly true on spending: he proposed modest increases to the budget and line-item vetoed millions of dollars each year only to have most of those vetoes overridden. But Romney will likely also be eager to push the message that he was a governor who stood by a no-new-taxes pledge. That's mostly a myth.
If you consider the massive costs to taxpayers that his universal health care plan will inflict once he's left office, Romney's tenure is clearly not a triumph of small-government activism.

Five years ago, like they are today, Romney's "fiscal and economic achievements are central elements of his campaign." Back then, Pam Belluck at the New York Times reported that some in Massachusetts questioned the health of the state's economic and fiscal condition, leaving his successor to fill a whopping budget deficit of $1.3 billion.
Unemployment is still relatively high… some economic analysts say Mr. Romney has exaggerated some of his successes or taken credit for improvements that had more to do with national trends.
"When he talks about a turnaround, we really haven't had a turnaround," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a nonpartisan organization that analyzes state economic policies. "We had a temporary fiscal respite. But we're trailing the nation in job growth. Our job growth has been anemic."
The average unemployment rate fell to 4.8 percent in 2005 from 5.8 percent in 2003, the State Department of Workforce Development said, but has increased since then. It averaged 5 percent in 2006 and was 5.3 percent in January of this year, compared with a national rate of 4.6 percent.
Mr. Romney says he did not raise taxes, but some critics say that is not entirely accurate. There was no broad-based tax increase — no change in the income tax, sales tax or gas tax — but Mr. Romney did increase some fees, and he instituted changes that he called closing corporate tax loopholes, which some consider a euphemism for raising corporate taxes.

Supporters of Governor Romney highlight his executive experience as a positive and an advantage because of the current state of the national economy. However, with a closer inspection, you can see a mediocre fiscal record on spending, taxes, and the economy:
  1. Romney says that he reduced spending – but spending in Massachusetts increased at an even faster rate than federal spending.
  2. Romney says that he didn't raise taxes – but per capita taxes rose during his term, and he did technically raise taxes through fee hikes.
  3. Romney says that he understands job creation – but Massachusetts had meager job growth under his leadership, and the labor force contracted via outmigration as workers saw an unattractive place to live.
  4. Romney says that he knows what businesses need to succeed – but the state's economy underperformed the national economy, while he raised corporate taxes by closing loopholes without cutting rates concurrently.
It's hard to look at this data and rationally believe that Romney would be good for the national economy, when his record of success in Massachusetts is this uninspiring.

Saturday, March 3, 2012

ObamaCare = RomneyCare (and that’s why we must defeat them both)

Conservatives have been fighting the Patient Protection and Affordable Care Act (ObamaCare) as an unconstitutional government takeover of the health insurance industry since it was rammed through without a single Republican vote in the Senate or the House.

The second anniversary of this law is coming up on March 23. Three days later, the Supreme Court will begin hearing oral arguments on three key questions, before making a final ruling in June:
  • Because of their power to regulate interstate commerce, did Congress have the authority to mandate all Americans to either obtain health insurance or pay a penalty?
  • Can ObamaCare remain in effect if the mandate is determined to be unconstitutional?
  • Can Congress require states to choose between complying with ObamaCare or losing federal Medicaid funding?

George Will summarizes what is at stake at the Supreme Court – the concepts of a limited federal government and federalism:

Spending on Medicaid, a theoretically cooperative federal-state program, is approximately 40 percent of all federal funds given to states and 7 percent of all federal spending… Under Obamacare, however, the cooperative nature of Medicaid has been radically revised in a way no state could have anticipated before becoming inextricably entangled with it.
In theory, state participation in Medicaid is voluntary; practically, no state can leave Medicaid because its residents' federal taxes would continue to help fund the program in all other states. Moreover, opting out of Obamacare's expanded Medicaid would leave millions of poor people without affordable care. So Obamacare leaves states this agonizing choice: Allow expanded Medicaid to devastate your budgets, or abandon the poor.
The Obamacare issues of Medicaid coercion and the individual mandate are twins. They confront the court with the same challenge, that of enunciating judicially enforceable limiting principles. If there is no outer limit on Congress's power to regulate behavior in the name of regulating interstate commerce, then the Framers' design of a limited federal government is nullified. And if there is no outer limit on the capacity of this government to coerce the states, then federalism, which is integral to the Framers' design, becomes evanescent.

Susan Page at USA TODAY reports on the populace's skeptical view of ObamaCare, which was intended to be Barack Obama's signature achievement but has become a significant problem in his reelection campaign. According to a recent USA TODAY/Gallup poll of registered voters in twelve of the nation's most competitive battleground states, there are strong views and considerable opposition to ObamaCare.

In 2008, Obama won all 12 of the "swing states" as defined in this poll. If Obama wins the same states in 2012 as he did in 2008, he would have a 208-179 electoral vote advantage before these dozen states. The Republican nominee would need to win at least 91 out of the 151 electoral votes below in order to win the presidency.

The highlights of the polling:

  • 53% of all swing state voters think that it was a bad thing that Congress passed ObamaCare – eight in 10 Republican voters concur
  • 76% of swing state voters believe that the law will either make things worse or not make much difference in the long run for their family
  • 53% would favor or strongly favor repealing the law if a Republican is elected in November
  • 76% of all swing state voters think that the individual mandate is unconstitutional – nine in 10 Republican voters concur

Over the past two years, Obama has been unable to convince us that it was worth the effort. Republicans are united in opposition against him, and his standing among independents has eroded. Page writes that "though the law has avid supporters, especially in the president's Democratic base, the net effect among middle-of-the-road voters is negative for him. What's more, the issue unites the GOP when the party is fractured among competing presidential contenders."

Health care ranks near the top of a list of concerns for advocates and critics of the law. Nationwide, it trails only the economy and the deficit as being the most critical issues facing the nation, rating a bit higher than unemployment and terrorism.

Opposition to the law is eroding Obama's support among the middle-of-the-road voters both nominees will court this fall. Among independents, 35% say the law makes them less likely to support Obama, more than double the 16% who say it makes them more likely.

The intensity of feeling among potential swing voters also favors opponents. Among independents that lean to the GOP, 54% say they are much less likely to support Obama as a result. Among independents who lean to the Democrats, 18% say they are much more likely to support him.

Meanwhile, Mitt Romney has been pandering to conservatives and criticizing ObamaCare, while steadfastly refusing to be honest and admit that RomneyCare provided Obama with a model. In every important respect, ObamaCare is RomneyCare 2.0, as you will see in the following video from the Cato Institute in April 2010:

In the presidential debates with Obama this October, and in the fierce campaigns this fall to win back the Senate and keep a majority in the House, how can Romney lead the conservative fight against a plan that is modeled after his own, while claiming that he didn't provide the prototype framework?

David Boaz, the Executive Vice President at Cato, asked this same question just after ObamaCare became the law of the land. Romney has struggled to explain the difference between his Massachusetts universal-health-care plan and ObamaCare, which both feature "an individual mandate, subsidies, and forbidding insurance companies to deny coverage for preexisting conditions." His argument that RomneyCare was passed in Massachusetts on a bipartisan basis is not a substantive defense, and there is still no legitimate conservative defense of an individual mandate.

Boaz's post concludes with a question: "Can the Republican effort to defeat President Obama and repeal ObamaCare really be led by the first American political leader to impose a health care mandate on citizens?"

I contend that it cannot.

Besides this obvious hypocrisy, RomneyCare isn't doing well enough to justify its existence and is certainly not conservative. James Pethokoukis at the American Enterprise Institute links to an academic study in Health Affairs, a leading peer-reviewed journal of health policy thought and research. Since RomneyCare provided the template for ObamaCare, Massachusetts' experience over the past six years provides a forecast of the impact of ObamaCare. The study notes that:

There is, however, reason to be concerned about employer-sponsored insurance premiums because health care costs in the state continue to rise.

Following her recent article cheering for RomneyCare, Peter Ferrara at The American Spectator educated Ann Coulter, the infamous conservative commentator and Romney advocate, on the individual mandate. Ferrara served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under the first President Bush. He was one of the first conservatives to ring the alarm bell over the individual mandate, when he successfully led the fight to kill the Heritage Foundation health bill that was introduced by Sen. Don Nickles as an alternative to HillaryCare.

Ferrara writes that "the Heritage health plan with its individual mandate was detested throughout the conservative movement", because the mandate inevitably leads to socialized medicine, with larger government to control both health insurance and health care, and an eventual rationing of health care.

If the government mandates what specific health insurance that you have to buy, the politicians are ultimately too weak to prevent everything from being included and covered. Predictably, once everything is included, the mandated insurance is extremely expensive. Ferrara explains the consequences: "As the costs to the government, taxpayers, and others for this mandated health insurance skyrocket, the government will decide it must step in to control costs."

RomneyCare is perceived unfavorably because "it is virtually the same thing as the widely detested Obamacare." Ferrara notes that both include the individual mandate, sharp increases in Medicaid, guaranteed issue and community rating, welfare subsidies for the purchase of health insurance, and the underlying government power for price controls on health insurance and rationing of health care.

According to Ferrara, uncompensated care for "free riders" is just 2% of total health costs – this is always one of Romney's key justifications, but is a weak excuse for the introduction of socialized medicine.

Last year, author Sally C. Pipes of the Pacific Research Institute glimpsed a future with ObamaCare, noting that Massachusetts health care spending is "out of control", and that Romney was lying when he "declared that he could radically expand government health care without it costing more."

Five years in, Bay State residents are being told that global budgets, price controls and rationed care are not only necessary but good for their health. Terry Dougherty, director of MassHealth, said recently, "I like the market, but the more and more I stay in it, the more and more I think that maybe a single payer would be better."
Don't believe it. But do believe this — single payer is the logical and, indeed, likely extension of Romney-Obamacare.

The recent USA TODAY/Gallup polling suggests that Romney shares Obama's health care problem: "Among Republicans and Republican-leaning independents in the battleground states, 27% say they are less likely to support him because he signed a Massachusetts law that required residents to have coverage. Just 7% say it makes them more likely to back him."

During the Republican candidates' debate in Jacksonville on January 26, Rick Santorum effectively argued with Romney on health insurance.

In the Wall Street Journal, author Grace-Marie Turner scores this debate, and notes how Santorum exposed Romney's "weak and contradictory defense" of RomneyCare.

Mr. Romney's attempt to contrast his plan with ObamaCare wasn't convincing. "I don't like the Obama plan," he said in Thursday's debate. "His plan cuts Medicare by $500 billion. We didn't, of course, touch anything like that. He raises taxes by $500 billion. We didn't do that."
These are bogus boasts: States have no authority over cuts in the federal Medicare program, so cutting Medicare never was an option with RomneyCare. Massachusetts didn't raise taxes to finance its plan because it relied on previously enacted health-insurance taxes and an infusion of federal Medicaid money to finance its coverage expansion. The state simply passed a big share of its costs to federal taxpayers.
Mr. Santorum was passionate in insisting that Mr. Romney's defense will collapse in a debate with President Obama, and the candidate would be wide open to attack. "Folks, we can't give this issue away in this election. It is about fundamental freedom," he said.
Mr. Romney has indeed backed himself into a corner by insisting on defending his health plan while attacking ObamaCare. In the Oct. 11 debate at Dartmouth College, Mr. Romney said: "[W]e all agree about repeal and replace. And I'm proud of the fact that I put together a plan that says what I'm going to replace it with."
Does he really mean that he wants to use Massachusetts as a model for his "replacement" plan? No wonder voters are worried.

David Catron writes at The American Spectator that most Republican voters would disagree with Romney that "it's not worth getting angry about."

Romney apparently didn't notice that the hundreds of thousands of people who showed up at the nation's capitol to protest the impending passage of Obamacare were pretty angry. In fact, after the law was passed over their vehement objections, a significant portion of the voters were so outraged by the back-room skullduggery used to pass "reform" that many Democrats were actually afraid to hold town hall meetings and face their own constituents during the run-up to the 2010 midterms. Moreover, despite the many whoppers told by the President's accomplices in the media about the "anti-incumbent mood" of the electorate, the drubbing the Democrats received in that election was obviously driven by voter indignation about being force-fed Obamacare.
Romney's reversals of position have been so frequent and transparently self-serving that a moderately intelligent preschooler could see through them. Health reform is Exhibit A. When running against Ted Kennedy for the Senate in 1994, Romney represented himself as the champion of a free market health system: "I do not believe in a government takeover of the healthcare system." After becoming Governor of Massachusetts, however, his position changed so radically that he signed a health reform law that later became the model for Obamacare. Now, he claims to oppose Obama's version of the plan, though the two laws are identical in all important respects.
Romney would also have us believe that he will repeal Obamacare in its entirety. He has made this claim in virtually every Republican debate. During his exchange with Santorum on Thursday, for example, he phrased it thus: "It's bad medicine, it's bad for the economy, and I will repeal it." Predictably, this differs from what he said immediately after the law was passed: "I hope we're ultimately able to… repeal the bad and keep the good."
When Rick Santorum's tone during last Thursday's debate betrayed annoyance at Romney's health care contortions, it was because he actually cares about the threat to basic liberty presented by Obamacare. It's not an easy thing for a man of genuine principle to tolerate an opportunist like Romney, who obviously sees the issue as just another lever that he can use to hoist himself into public office.

Catron also wonders why Santorum is the only Republican candidate talking seriously about ObamaCare and making the case for why it must be repealed. All of the candidates promise to repeal the law, but besides Santorum they lack passion in their opposition.

Romney, Ron Paul and Newt Gingrich have "failed to give the issue the attention it merits", while Santorum "has not merely explained why Obamacare must be repealed but has repeatedly declared it the most important issue of the campaign… Perhaps the pledges issued by the others amount to nothing more than perfunctory rhetoric meant to mollify the Tea Partiers."

Catron writes that Santorum is well suited for this debate: he is a genuine conservative (unlike Romney), he actually understands that ObamaCare constitutes a very serious threat to individual freedom, and he clearly understands health care in a way that the others do not (even Dr. Paul).

Unfortunately, the media "rarely cover Santorum's comments on the subject unless they can find a way to misrepresent his position as hopelessly doctrinaire and irrational."

Suppose that the Supreme Court rules that the individual mandate is constitutional. While disappointing, we would still have another opportunity with a Republican President and both houses of Congress to repeal ObamaCare in 2013. If Romney sold-out conservatives to introduce RomneyCare in Massachusetts, what would he do if he is the Republican nominee? Should we really believe that a self-serving, inauthentic, unprincipled flip-flopper like Romney will fight as hard as conservatives need him to?

Let's not forget that Romney has previously said that he wants to keep the good parts and just repeal the bad parts of ObamaCare, and back in December 2007, candidate Romney appeared on NBC's Meet the Press to defend RomneyCare, predicting that other states would embrace the individual mandate concept, calling it "a terrific idea" and the "best path":

We cannot throw away two years of fights and hope that Romney governs as a conservative. We must support Rick Santorum, fight the battle in the Supreme Court and Congress, take our conservative message to the voters in the battleground states, and send Romney back to Massachusetts to enjoy his socialized health insurance.

It is worth getting angry about, Mitt.