The Washington Post

The economic heterodoxies of Romney’s brain trust

Clockwise from top left: Glenn Hubbard/University of Central Florida, Greg Mankiw/Greg Mankiw's Blog, Jim Talent/Congress Bioguide, Vin Weber/University of Minnesota.

Yesterday I pointed out that top Romney policy adviser Glenn Hubbard's support for a less valuable dollar flies in the face of Republican conventional wisdom on the matter. And that's hardly the only issue where Hubbard, Harvard professor Greg Mankiw, former representative Vin Weber and former senator Jim Talent — who together make up Romney's economic brain trust — diverge from commonly held Republican positions.

Glenn Hubbard:

  • Backed short-term stimulus — Yesterday, Hubbard argued that austerity helps the economy in both the short and long terms. But two years ago, he wrote an op-ed for Politico arguing that a temporary payroll tax holiday (of the kind passed later that year) or a corporate tax cut would stimulate the economy in the short run and should be combined with a longer-term fiscal consolidation. At least then, he appeared to back the Keynesian view that lower taxes or higher spending is stimulative and austerity hurts short-term growth.
  • Supports mortgage refinancing — Hubbard and his Columbia colleague Chris Mayer have proposed having federal agencies that back mortgages, such as Fannie Mae, Freddie Mac and the Federal Housing Administration, aggressively work to help homeowners refinance. The plan is intended to aid lenders who are "underwater" — that is, who owe more than their homes are worth — and in so doing save the average borrower around $2,000-3,000 (pdf). The Obama administration eventually adopted a mortgage refinancing plan that Hubbard thought fell short of his and Mayer's plan, but about which Mayer was more optimistic. The Romney campaign has so far resisted embracing mortgage refinancing.
  • Progressive budget balance — Hubbard co-authored an op-ed with left-leaning Princeton economist Alan Blinder that, among other things, endorsed the idea that any long-term fiscal consolidation should "should ask more sacrifices from more-well-off households than from less-well-off households." Given Romney's endorsement of Paul Ryan's budget — which the Center for Budget and Policy Priorities's analysis indicates would disproportionately affect low-income people — this view could cause tension between his and Hubbard's views.
  • Against Grover Norquist — In a 2010 op-ed, Hubbard praised the Bowles-Simpson budget  — which includes about $2 trillion in new revenue compared to current policy — and attacked Norquist's Americans for Tax Reform for denouncing it and ruling out any tax increases. "It is hard to share the view that no tax increase of any sort can figure in a fiscal solution," Hubbard wrote. "It is not reasonable to argue that there is no single activity that can face higher taxation. If the economy must pivot toward investment and exports, tax policies must be changed to encourage productive investment over consumption." Romney has signed Norquist's tax pledge, which a budget that included tax increases of the kind Hubbard implicitly endorses here would break.

Greg Mankiw:

  • More inflation — Mankiw wrote an op-ed for the New York Times last year that expressed sympathy with economists who argue that the Federal Reserve should announce its willingness to tolerate 4 percent annual inflation, instead of the 2 percent target it currently enforces. Mankiw judged that position politically suicidal, preferring instead a more flexible 2 percent target that would allow more aggressive Fed action if inflation fell below 2 percent, as it has recently.
  • Negative interest rates — In 2009, Mankiw wrote another op-ed entertaining ways of letting the Fed set negative interest rates (ie, destroy saved money), such as a tongue-in-cheek suggestion to declare bills ending with a certain digit no longer valid legal tender. In a follow-up post, Mankiw noted that the op-ed generated more heated reaction than anything else he had written, and expressed his view that an appropriate interest rate would be around negative 1 percent.
  • Carbon tax — Perhaps Mankiw's most famous conservative heterodoxy is his support for a carbon tax, or a higher gas tax, to combat climate change and other costs associated with the consumption of fossil fuels. The taxes are known as Pigovian, as they rely on the late British economist Arthur Cecil Pigou's theory of externalities (now a standard part of microeconomics). Mankiw has started a group, called the Pigou Club, to promote such taxes.
  • Simpson-Bowles — Mankiw authored an op-ed after the release of the Simpson-Bowles budget stating that it "is not perfect, but it is far better than the status quo."

Vin Weber:

  • Simpson-Bowles — Like Hubbard and Mankiw, Weber has expressed support for the Simpson-Bowles deficit reduction plan, which conservatives have denounced because it includes revenue increases. He coauthored an op-ed with former Democratic representative Jane Harman calling on the White House to request that Congress reconsider Simpson-Bowles.
  • Export-Import Bank — Weber coauthored an op-ed with former Clinton Treasury secretary Robert Rubin praising the Export-Import Bank, which subsidizes U.S. exports. The piece was meant to counter conservative criticisms of the bank. "Bank critics believe Ex-Im is corporate welfare. We disagree," Weber and Rubin write. "Some critics believe that export credit financing distorts free markets, when in fact the opposite is true."

Jim Talent:

  • Environmental regulation — As a congressman in 1993, Talent co-sponsored a bill to direct the EPA to regulate 15 new contaminants in drinking water. As a senator in 2005, he co-sponsored a bill written by then-Senator Barack Obama to promote ethanol fueling stations. He also lead the successful fight to add a renewable energy standard to the 2005 energy bill that required 7.5 billion in renewable fuels be added to the national fuel supply by 2012. Indeed, he touts the latter victory on his bio page at the lobbying firm where he works today.
  • Taxes — Talent earned consistently middling marks from anti-tax groups while in Congress, including four straight B-s as a senator and a C as a representative from the National Taxpayers Union. In contrast to the Romney campaign's current focus on boosting exports, Talent voted in 2005 against repealing tax breaks to companies engaged in outsourcing.

To be clear, the point here isn't to allege hypocrisy on anyone's part: Advisers are allowed to hold different positions from the candidate. Rather, it's to note that while Romney's campaign has hewed very close to Republican Party orthodoxy, key members of his economic brain trust have shown a willingness to entertain ideas that are outside of it. Whether that means a President Romney would also be willing to consider such policies is an open question.



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