For all the stiffness and the flip-flopping, what has really gotten Mitt Romney into trouble with the Republican primary electorate is when he says something that shades too close to the truth. We saw another example of that yesterday, when Romney committed the sin of explaining how austerity works in a recession:
Mitt Romney said Tuesday that cutting spending slows growth in the economy — a rhetorical slip more akin to an argument a Democrat might make than a Republican.
Speaking in Shelby Township, MI, the former Massachusetts governor took a question about the Simpson-Bowles fiscal commission empaneled by President Obama to address the nation’s deficit and debt issues. In his response, he said that addressing taxes and spending issues are essential.
“If you just cut, if all you’re thinking about doing is cutting spending, as you cut spending you’ll slow down the economy,” he said in part of his response. “So you have to, at the same time, create pro-growth tax policies.”
I love how this is described as a “rhetorical slip” rather than a partial truth. Cutting spending does, in fact, slow down the economy, especially in the midst of a recovery out of recession. Now, what Romney says at the end there is that “pro-growth tax policies,” by which he means tax cuts, need to be paired with the spending cuts to create that demand.
This is not only the orthodox position of the GOP, but it’s largely what just happened in Congress. The payroll tax cut is a “pro-growth tax policy” in this analogy, and you can view the spending cap from the debt limit deal or the trigger or any number of other spending cuts as representing the spending trims paired with it. This time the payroll tax cut wasn’t offset with spending cuts, but that’s the major difference.
As a macroeconomic matter, tax cuts add to deficits, and Modern Monetary Theory and basic Keynesian economics dictate that you need to run a high deficit out of a recession. The difference is that tax cuts are actually worse at providing economic growth than boosting spending. You can see that with the low-growth economy of the Bush years. By the same token, tax increases are a better policy in terms of austerity than spending cuts. The economic multiplier is simply higher on the spending side, and this gets more pronounced when the beneficiaries of the tax cuts are wealthy. Spending usually services the poor, who have a higher propensity to spend their benefits. The big tax plan Romney plans to announce on Friday will, almost certainly, lower taxes mostly on the rich.
So Romney, while being derided as “not a true conservative” because of this quote by the likes of the Club for Growth, is actually well within the conservative mainstream in calling for tax cuts paired with spending cuts. It’s just well outside the mainstream of demonstrable economic theory.




20 Comments

Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
Lemme do some Megan McArdle math, channeling the TBogg crowd.
We’ll throw out some hypothetical numbers here.
If we cut revenues by 5%, and cut spending by 5%, everything will improve!
Wait a damn second.
100%-5%+5%=100%…
Bigger deficits & more tax cuts for the rich.
What could possibly go wrong with that plan.
Well, from the perspective of the 1%: whadda great plan!! Booyah!
For the 99%: get out the lube. Sucks to be us.
Typed this comment twice in the past couple of days, so you might have already seen it.
The only thing the 1%ers don’t understand is that it is not about them. It is about the 0.01%ers. Everyone else will eventually get pissed on.
I wonder how long our country will continue to ignore the fact that we’re a consumer-based economy.
Without increased consumer spending the economy can’t grow. If you cut income to those who spend every penny, you cut revenue. Increasing income for those that don’t need to spend their earnings takes money OUT of the economy.
Oh, wait. That’s what they’re trying to do? Never mind. I’ll be over here in the corner.
That’s true, and I agree. However, those who are in the 1%, but not the .0001%, will mostly do fine. They’re rich enough to have off-shored enough money to protect themselves for quite some time to come.
It’s actually citizens who are in the very upper levels of the 99%, who’ll be the most surprised when the shit really hits the fan. They’re the most complacent, and they’re busily out there right now spend, spend, spending like crazy & once again over-extending themselves. One fine day soon, it’ll all crash & burn again only worse. By then, it’ll be too late for them.
PTB don’t think that far into the future.
Every 0.01%er society had to rely on exports to survive. South plantation society, worked on the backs of black slaves and indentured whites, would have gone bust without being able to export to the nonsouth.
Ditto industrialists of the Gilded Age. That was teh flowering of empires, including the U.S. gunboat expansion into the Caribbean and Pacific. And forced brown people to buy stuff at gun point, or in the case of Britain, also had to get them addicted to opium.
I suspect it’s hubris of empire to think that, since they have all the money & all the power, finding customers is the least of their worries.
Your point combines nicely with Kris’s, which is who will be the customers. This squeeze will keep working its way up the income distribution. It will take a long time for each new percentage point to figure out that they are victims too. There’s a lot left to loot.
It’s a snake eating its own tail.
Once the middle class is gone, the lower upper class is on the menu.
I’m with you. I’m convinced that they know this country will fail, and that they’re just trying to steal everything they can before the fall.
I posed the question in a thread last week – Where do they think they’ll be safe when they’ve crashed the global economy? Where will they spend their money? Who will provide their goods and services?
The ultra wealthy, the .01% (I could argue the top 10-20%) don’t produce a damn thing. There’s no actuarial value to their work product.
So what happens when they’ve burned the world to the ground?
Is this where Newticles was headed with his moon colony suggestion?
They’ve already written the history book.
They don’t think that far ahead.
But I suppose if they did, they would say that they can rely on the 99ers to work their butts off putting the world back together again.
That’s what happened to the environment of continental U.S. which they trashed from sea to sea in less than 100 years: killed every beaver, every bison, cut down every tree, etc.
That’s what happened after the Great Depression.
It may be why great fortunes don’t last more than a couple of generations. Even in monarchies there was quite a bit of change at the very top.
This discussion is getting too cosmic for me.
Cocktails anyone?
Disgusting propaganda.
Ya gotta laugh sometimes.
Caption under Keynes pic:
“Even Mitt Romney grasps a bit of John Maynard Keynes”
Um, which bit?
Sorry. Sort of.
8-)
eCAHN,
It’s 2:30 in Calif…
Does anyone really believe anything Romney says anymore? Really the man will do and say anything depending on the crowd he is speaking to. I can understand why the Republican base don’t trust him. He is worse than a weather vane in a storm!
just say “the trickle down is a yellow liquid that isn’t anything like gold” instead of “pissed on”.
wait, Romney is a very well lubricated weather vane that changes direction in the slightest breeze.
He isn’t trusted by the Republican radicals because he won’t call the Girl Scouts agents of PP turning girls gay and pregnant needing abortions, he won’t claim Obama is a Muslim born in Kenya, and he won’t claim Obama went too far by prohibiting plural marriage in his attack on Mormons in clear violation of the First Amendment religious liberty.