Mitt's missing economic memo

As the Republican Party struggles in the polls, its leaders are failing to grasp the fact that their basic economic message is unappealing to US voters scarred by the GFC.

A Republican article of faith is that high unemployment should put Governor Mitt Romney in the White House. With their candidate fading in the polls, party operatives focus on tactical corrections but fail to grasp that the basic GOP message – lower taxes, deregulation and free trade – is unappealing to voters scarred by the Great Recession and corporate abuses.

Governor Romney would lower personal and corporate income tax rates, financed by eliminating deductions, credits and loopholes totalling nearly $500 billion. Almost certainly, that nixes cherished middle class benefits like the mortgage interest deduction. By shifting around the tax burden rather than reducing it, he gives President Obama the opening to charge that he would raise taxes on many middle class families.

Streamlining regulation to open up petroleum development in the Gulf, off the Atlantic and Pacific coasts and in Alaska could cut oil imports in half and create 2.5 million jobs – without adding to CO2 emissions or environmental risks. However, Romney has not explained the latter – he wrongly assumes swing voters embrace conservative doubts about global warming and don’t harbour lasting fears from Deepwater Horizon.

He repeats this lack of empathy on many issues.

Dodd-Frank imposes an unnecessary overlay of new regulations that curtail prudent lending and smother regional banks. The financial collapse was caused by accounting frauds the 2002 Sarbanes-Oxley reforms should have caught but didn’t, because the Treasury is too much in the vest pocket of the Wall Street aristocracy.

After trillions in Federal Reserve and Treasury bailouts, multi-million dollar paydays continue for big bank chief executives and their lieutenants, allegedly for "talent” – the remarkable aptitude to nearly destroy global capitalism through irresponsible business practices. Hardly a week goes by without new revelations about schemes to rook investors or evade taxes.

Banks will never return to honest lending and stop abusing depositors and credit card customers until those bonuses are dramatically slashed, because bankers can’t pay themselves so grandly by making ordinary loans and behaving like honest men.

Romney would repeal Dodd-Frank but has not explained how he will clean up this mess.

The governor’s tax proposals don’t even call for ending gems like the "carried interest” provision and special treatment for stock options that permit Wall Street financiers and corporate executives to pay taxes on wage income at half the rate small business owners and even some school teachers pay.

Free trade is great stuff but not with China. It chisels and cheats by undervaluing its currency, forcing US companies to produce in the Middle Kingdom to sell there, stealing technology, polluting wantonly to gain cost advantages, and subsidising state-owned exporters through state-owned banks.

All this costs Americans at least 2.5 million jobs but the governor is vague on how he would end it and doesn’t explain to Americans who have jobs how they would be better off paying more for coffee makers at Wal-Mart and TVs at Best Buy.

Americans want the economy to work better but also fairly. That means rising wages – not just lower taxes – as many Americans pay little or no income tax.

Policies that boost the economy without ending the Manhattan gravy train, or curtailing unfair trade without raising wages, would only benefit those who Obama wants to tax more aggressively – the wealthy who have done quite well while the nation as a whole becomes poorer.

Romney – and the broader GOP – have not adequately explained how he would deliver growth, jobs and fairness.

President Obama surely is not delivering on growth and jobs but at least he appeals to voter’s desire for a greater measure of economic justice.

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist.

Follow Peter Morici on Twitter @pmorici1


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