Romney didn’t wreck his state’s economy. But he didn’t save it, either.
By Suzy Khimm,
CHARLES DHARAPAK/ASSOCIATED PRESS
The Massachusetts economy wasn’t in great shape during the early aughts. As Mitt Romney’s opponents like to point out, the Bay State ranked 47th out of 50 states in terms of job creation from 2003 to 2007. It was only one of two states to have no growth in its resident labor force between 2002 and 2006. But as Mitt Romney is quick to note, it survived its economic crisis — and even saw its credit rating improve — through a combination of higher taxes and spending cuts. Recovery did come.
So which side is right? Neither of them, really. Massachusetts’ depressed economy didn’t have that much to do with the Romney administration. But Romney also takes credit for tough budgetary decisions that he himself opposed.
When Romney took office in early 2003, the state was still reeling from the 2001 dot-com bust, which delivered a huge hit to its high-tech sector. Throughout the flush 1990s, Massachusetts repeatedly slashed taxes, leaving the state budget ill-prepared to weather the blow when the economy went into free fall. Ultimately, “Massachusetts suffered a worse recession than just about any other state,” says Michael Widmer, president of the Massachusetts Taxpayers Foundation, a nonpartisan think-tank.
Democrats and Republicans are now using Massachusetts’ economic woes during the Romney administration to slam the former governor on the presidential campaign trail. "Utah led the way in the United States in terms of job creation,” said ex-Utah governor and current presidential candidate Jon Huntsman Jr. “Compare it — and contrast it — with certain other states, like, we'll say Massachusetts — that I'll just pull out randomly. Not first, but 47th.”
Romney’s campaign likes to brag that 50,000 jobs were created in his state during his governorship, but such job growth lagged far behind other states at the time. Economists, however, warn against blaming Romney for the shortfall during his time in office. “We had a slow and anemic recovery mainly due to the high cost of living here, more than anything that was his doing … during his administration there was very little that he could have done,” says Alan Clayton-Matthews, an economist and public policy professor at Northeastern University. “A current sitting governor has very little impact on the current and near-term state economy, because it’s a balanced budget state, and there’s very little they can do.”
Romney’s more immediate task when he began his governorship was to help resolve the state’s fiscal crisis. But once again, he wasn’t completely in the driver’s seat. The year before he took office, the Democratic legislature passed a budget that cut spending, raised taxes and put state money into a “rainy-day fund.” Though Romney had campaigned against the tax increases — which included a higher capital gains tax, lower personal exemptions and eliminating a scheduled income tax cut — they were already set to go into effect when he took office. Though Romney boasts that he closed a $3 billion budget shortfall, the tax increases he opposed ultimately helped cover a huge portion of the gap. The state, for example, gained $1.3 billion more in capital gains taxes than officials had expected.
Romney’s own efforts to resolve budget shortfalls focused on spending cuts, raising fees for a range of public services and tweaking the corporate tax code, which included closing tax loopholes and advocating changes that some businesses have equated to higher taxes — such as limiting the ways that state-based corporations could move income to lower-tax states. His new fees alone brought in $500 million in revenue.
All of this helped to improve the state’s fiscal outlook. As Politico’s Ben Smith revealed this week, Romney acknowledged the role that tax increases played in his presentation to Standard and Poor’s in 2004. The slides show the central contribution of the tax increases that Romney opposed, and note that Romney himself “increased fees to raise $271 million yearly.” S&P concurred and upgraded Massachusetts from AA- to AA, agreeing that the state’s balance sheet was in better shape. But though Romney is happy to take credit for S&P’s decision on the campaign trail, he’s going to have more trouble taking credit for the policies that led to their decision.