Debunking the “Romney Recovery”

In today’s Sunday Review, David Leonhardt suggests that the way the economy is going (up), either candidate will get to take credit for the recovery should he take office in January. To some degree, this line of thinking echoes Jon Chait’s habitual speculation about the positive economic potential of a Romney presidency: Because Mitt will need to prove he can indeed fix the economy, and Republicans only seem to oppose stimulus (see 2001, 2003, 2008) when Democrats propose it, Romney would stand a good chance of deploying some measure of Keynesian policy once he takes office in 2013. Here, Chait lays it out again in New York Mag’s recent election issue:

Democrats have implemented Keynesisan stimulus and called for more (Obama’s proposed American Jobs Act, which House Republicans have blocked,) while Republicans have denounced it in apocalyptic terms. But a Republican win offers by far the more likely prospects for immediate Keynesian stimulus, partly because Democrats in Congress have shown no taste for the kind of economic sabotage that the Republican caucus has engaged in. The strange alchemy of political self-interest dictates that the best prospect for boosting the recovery, through elevated short-term deficits, requires handing the reins of government over to the party that has blocked exactly this possibility.

Whether like Leonhardt, one thinks the economy will improve regardless of who takes office, or like Chait, one surmises that a Romney presidency might actually leave us better off, both perspectives are overly sanguine. With modest stimulus from either candidate–reducing taxes, spending on infrastructure, extending unemployment benefits–household income, GDP, and employment levels could realistically bounce up. But that ignores other measures of a healthy economy; namely, the sort of “assets-based” recovery this magazine called for in July. (According to data released this summer by the Fed, median wealth decreased 40% from 2007 to 2010, eliminating 18 years of savings for the average family. Family income, which short-term stimulus would likely tackle, fell less than ten percent in that same period.) It’s hard to imagine a potential Ryan-Romney-style stimulus boosting that pocket of the economy, given the other policies the ticket is proposing.

First, by repealing Obamacare, which he promises to do, and might be able to through ‘budget reconciliation,’ Romney wouldn’t be doing the economy any favors. For starters, the bill has already reduced out-of-pocket costs and insurance premiums for patients. In addition, as MIT economist and Romneycare architect Jonathan Gruber wrote in TNR this summer, the law will increase economic security, which will in turn free up consumer spending, both on regular goods and on the medical industry. (Will Obamacare kill jobs, you ask? Well, Romneycare didn’t.)

Then there’s the matter of the Ryan/House budget, which a GOP-controlled Senate could push through. Assuming most its planks remain intact (allowing for Romney’s potential middle-class stimulus), the budget would negatively impact the wealth of lower-income earners. As Brad Plumer wrote earlier this year, the Ryan plan would “spend about 16 percent less than the White House on “income security” programs for the poor — that’s everything from food stamps to housing assistance to the earned-income tax credit.” Not only that, but if Romney really plans on eliminating loopholes and deductions to balance his own budget, as he insists, policies like the home mortgage interest deduction would likely have to be slashed, in order to approach the fiscally sound model he promises.

Third, the Ryan budget, if left intact, would cut Pell Grant eligibility and funding, thereby blocking some students from reduce their debt. Romney, who has (at various points) endorsed his running mate’s budget, has since waffled on Pell grants. Finally, Romney has pledged to repeal the Dodd-Frank financial reform act, which would mean the end of the Consumer Financial Protection Bureau.

There are other salient examples (women’s health is an economic issue too). But the takeaway is this: Whoever takes office in January, neither is likely to usher in the kind of robust stimulus that would allow families to rebuild the wealth and savings they lost during the Great Recession. Under Romney, however, families might expect to lose even more.

Simon van Zuylen-Wood

Simon van Zuylen-Wood is a writer for Philadelphia Magazine.