It has become a staple of Mitt Romney’s stump speech and debate answers to say he has an advantage over opponents because he alone has been in the private sector. But that biographical data point, I suspect, isn’t that compelling. He doesn’t tell voters why that matters. A more blunt phrasing would be to say: His opponents are economically clueless. That is not only true but persuasive.
President Obama still insists on raising taxes in a weak economy. He wants to enact a new minimum international tax, which would make U.S. companies even less competitive overseas. He seems blissfully unaware that mega-regulatory measures (Obamacare, Dodd-Frank and a new consumer protection agency) impair growth and hiring. His National Labor Relations Board seems to be on a mission to terrify employers. And he remains convinced that government spending creates jobs, despite evidence that it doesn’t.
Now Rick Santorum at least mouths the right platitudes: less regulation, cut the debt and lower tax rates. But when he gets beyond those bullet points it’s not clear his understanding of the economy is much better than the president’s.
Nicole Gelinas of the Manhattan Institute explains that Santorum’s idea to “revive’ housing by getting rid of Freddie and Fannie is cockeyed:
When people can borrow more mortgage money more cheaply than they otherwise could, thanks to Fan and Fred’s government backing, that money pushes up housing prices. It has nowhere else to go. Conversely, getting rid of Fannie and Freddie would push down housing prices, as houses would lose a big part of their government subsidy.
His other housing idea is no better: “The second proposal — to allow homeowners to deduct home-sale losses against their taxes — is at odds with, well, a lot of things. It’s at odds with simplifying the tax code . . . . It’s at odds with practicality. A family earning $75,000 with two kids at home pays about $4,440 in taxes. Sure, if the family sold a house at, say, a $10,000 loss, that $4,440 would certainly help (though it wouldn’t help the federal budget deficit!). But for a family whose home is many tens of thousands of dollars ‘underwater,’ the tax break would be little more than an afterthought. It wouldn’t affect the decision either way, so why waste the money? . . . It’s at odds with Santorum’s opposition to bailouts. Santorum reminds voters every chance he gets that unlike Mitt Romney (and presidential candidate Barack Obama), he opposed TARP.”
This isn’t the only indication that Santorum is confused about economics. His support for a zero tax-rate for manufacturing has been panned by everyone from former Obama official Christine Romer to legions of free market economists. And his pronouncement that the 2008 recession was caused by rising gas prices is a view shared by practically no one. (“The official government take on the collapse, authored by the Financial Crisis Inquiry Commission, blamed Wall Street banks for taking on excessive risk via subprime mortgages, and government regulators for failing to sniff out the start of the crisis before it threatened the global financial system. Republican members of that panel dissented from the official report, blaming a global credit bubble and lax government housing policy. But they didn’t put the blame on high gas prices, either.”)
Romney is right about his opponents’ lack of experience in the private sector but he has yet to connect the dots, that is, to illustrate how their unfamiliarity with business decision-making and some basic economic principles leads to fault policy. Obama sees economic policy as an extension of politics — reward friends (Solyndra, radical environmentalists) and punish enemies (“rich” people) — while Santorum sees it as a servant of his social policy (restore bygone manufacturing towns, promote big families and homeownership). Implicit in both of these is that the heavy hand of government should steer investment, hiring and spending toward “good” things and away from”bad” things. In that sense, neither candidate has much faith in free markets or a proper appreciation of the negative consequences that flow from government distortion of economic choices.