Tag: mitt romney

Do the American People Agree with Obama?

News reports quote President Obama, in discussing the debt ceiling and the ongoing argument over tax and spending policy in his press conference yesterday, saying:

It turns out the American people agree with me. 

Do they? It’s true that a majority of respondents told pollsters that they wanted to raise taxes on someone else. And Congress did that in the “fiscal cliff” legislation.

But what about the president’s insistence on a larger government and essentially no cuts in federal spending? The election day exit polls shed some light on those questions.

51 percent of voters polled said the government is doing too many things better left to businesses and individuals—8 points higher than in the 2008 election. Only 43 percent of voters said they believe government should be doing more.

49 percent said the 2010 health care law should be repealed, with only 44 percent of voters supporting it.

And 51 percent said they prefer smaller government with fewer services, while 43 percent prefer larger government. As usual.

There are many reasons that Mitt Romney lost the election, from the Republicans’ alienation of everyone except straight white men, to an effective campaign of demonization, to “legitimate rape.” But the polls don’t show that voters agree with President Obama on constant expansion of the size, scope, and power of government.

End, Don’t Cap, the Mortgage Interest Deduction

The housing market is soft, so this is the worst possible time to get rid of the mortgage interest deduction, right? Well, it’s not that simple.

1.) The deduction is not a subsidy to homeowners. It’s a subsidy to people who have mortgages, and then only if they itemize their taxes. Those claiming the standard deduction can’t take advantage. Paying cash for a home won’t qualify you for the deduction, either. Following a great recession fueled by would-be homeowners borrowing more than they could afford, it’s well past time for the feds to get out of the business of subsidizing home debt.

2.) Borrowing to own a home now costs homebuyers less in interest than it has historically, which means that the cash value of the mortgage interest deduction is lower than it will be under higher (future) interest rates. In other words, this particular tax-code goodie is at a historically low value to taxpayers, so why not get rid of it now?

Mitt Romney has nibbled around the edges of this idea. He would cap the mortgage interest deduction. In delivering a bit of a backhanded compliment, Yonah Freemark and Lawrence J. Vale write in the New York Times that “while Mr. Romney’s tax proposal overall may not be fair or sensible—or even mathematically logical—Democrats shouldn’t be so quick to attack any change to the mortgage interest deduction.”

Freemark and Vale would use the boost in federal revenue from ending the deduction to fund new housing programs. However, ending the mortgage interest deduction could also be used to lower overall tax rates. Mark Calabria and I chatted about the mortgage interest deduction this week for the Cato Daily Podcast.

Would Romney Be Good for American Education?

Without picking a winner in last night’s debate, it’s fair to say that Mitt Romney avoided the sort of conspicuous gaffs that can sink a campaign. He may well become the next president of the United States. Would that be a good thing for American schoolchildren?

Yesterday, I faulted an op-ed the Governor wrote for consisting chiefly of vagaries—but perhaps that’s not such a bad thing. Given that the federal government has spent roughly $2 trillion on k-12 education since 1965 and achieved none of its objectives, a president who talks much but does less would be a decided improvement.

But there are a few specifics in Romney’s education white paper… and some of them are deeply disconcerting. Immediately after stressing that “states and localities are best-positioned to reform their education systems” the document reverses course and declares that “the federal government cannot ignore the troubled state of American K-12 education,” and “is uniquely positioned to provide financial support for the education of our neediest students and to require states and districts to tell the truth about how their schools and students are performing.”

Certainly the federal government should not ignore America’s educational woes, having contributed to many of them for over half a century. But the subsequent claims are untrue and do not follow from the first. It is simply false that federal government funding is “uniquely positioned” to improve the education of the neediest students. In fact, one of the flagship federal programs for helping these students, Head Start, has been proven to have no lasting benefits by the federal government’s own research. More broadly, there appears to be no link between federal K-12 spending patterns and the student achievement gaps by socio-economic status or race. Nor is there any evidence that the federal oversight introduced by the No Child Left Behind law (the “telling the truth” referred to above) improved achievement overall or narrowed the gaps.

To be fair, the document acknowledges the ineffectiveness of past and current federal programs, and so the claim that federal funding is “uniquely positioned” to help disadvantaged students could be read to apply only to the Romney campaign proposal of “attaching federal funding to the students it is intended to support rather than dispersing it to districts.” The idea is essentially to voucherize federal funds, allowing them to be used even at private schools, where permitted by state law.

The benefits of increasing parental choice and competition between schools are well supported by the evidence, but here again, the federal “uniqueness” claim is simply false. Federal funding is not unique or necessary to ensuring universal school choice. The states are fully capable of doing this themselves because private schooling is, on average, about two thirds the per-pupil cost of public schooling, and so even without the roughly ten percent of education funding that comes from the federal government, state-level private choice programs could serve everyone.

Even though federal involvement in state school choice programs is not necessary it could still be a good idea. But it isn’t. As I argued when a similar idea was floated by President G. W. Bush, federal regulations would almost certainly follow federal funding of the nation’s private schools, homogenizing them from coast to coast and thereby eliminating the educational diversity upon which any choice program must rely. Since writing that piece, I have conducted a statistical study of the regulations imposed by state-level private school choice programs and found that vouchers already impose a large and highly statistically significant extra burden of regulation on participating schools. This is a grave enough problem when the regulations affect just the private schools in a single state, but that pales in comparison to the damage that would be done by such regulations at the national level.

Universal private school choice can also be achieved via personal and “scholarship donation” tax credits, and these programs do not seem to carry with them the same regulatory pall. But there is no reason to run the risk of enacting such a program at the federal level. On the contrary, the growing diversity of school choice programs at the state level is an asset, allowing us to see which state policies do the most to expand educational freedom and improve quality and efficiency. The best can then be replicated and the worst reformed.

Governor Romney says that he understands the free enterprise system, and knows that trickle-down government doesn’t work. He says that he wants to uphold our nation’s founding principles. Well, the evidence is clear that there is no need for or benefit to federal government intervention in state education policy and that there are in fact very grave risks to such intervention. And though it is unfashionable to draw attention to this fact, neither the word education nor the word school is mentioned in the U.S. Constitution. So if Governor Romney becomes President Romney, American schoolchildren will be very lucky if he remembers these facts, and uses the presidential bully pulpit to promote more and better state-level school choice programs rather than opening the Pandora’s Box of federal funding and regulation of private schools.

Romney’s 4 Percent: A Goal not a Promise, but Still Expensive

The advisers who introduced Mitt Romney to the idea that he should spend at least 4 percent of GDP on the Pentagon’s budget are busy clarifying what he means. But “their comments,” conclude Bloomberg’s Gopal Ratnam and Tony Capaccio:

only add to the uncertainty about how much a President Romney might add to the Pentagon’s budget and when, what the additional spending would buy other than more warships and how he’d propose to pay for what analysts say may be as much as $2 trillion in added spending while also whittling down the federal deficit as he’s promised.

Dov Zakheim, a former Pentagon comptroller in George W. Bush’s administration, told Ratnam and Capaccio that Romney’s 4 percent promise is a goal that “is not going to be achieved overnight or perhaps even by the end of the first term.” How quickly Romney reaches his 4 percent target, Zakheim explained at an event last week organized by the group Military Reporters & Editors, “will very much depend on the state of the economy and very much depends on the offsets you’ll be able to find within the defense budget,” but he affirmed that “Every effort will be made to ramp up as soon as possible.”

Differing assumptions about the pace of Romney’s increase explain the continued confusion surrounding his 4 percent plan. Zakheim had earlier claimed that the $2 trillion estimate cited by Obama “is essentially an assumption that we go to 4 percent of GDP from the get-go.” The Romney campaign, he explained, doesn’t intend to “come in with a massive supplemental” to the current budget to boost defense spending.

Others, including vice presidential nominee Paul Ryan, have criticized the $2 trillion figure, but have failed to offer their own estimate of the likely costs of Romney’s promise. In particular, Romney supporters have singled out an analysis by Travis Sharp of the Center for New American Security (CNAS), and have accused Sharp and CNAS of running cover for Obama. In earlier remarks to reporters, Zakheim asserted that the $2 trillion was concocted by Democrats, for shock value, and that it should therefore be taken with a grain of salt.

As to the question of how the additional Pentagon spending would be paid for, James Carafano at the Heritage Foundation shared some ideas with Ratnam and Capaccio. Romney may be able to reach the 4 percent of GDP goal by the end of the first term and still cut deficits as he has promised “with two caveats,” Carafano explained. Romney would have to get “tax reform done and address long-term entitlement spending.”

Slowly but surely, we are starting to understand Romney’s promise. And who said presidential campaigns were a waste of time?

A few clarifications are still in order, however.

First, the claim that the $2 trillion figure was created by Democrats and the president’s supporters is false. I first estimated–before Travis Sharp did–the likely costs of Romney’s four percent pledge here. Since then, I have twice revisited my estimates (here and here), settling most recently on two figures: $1.85 trillion in additional spending if Romney reached the 4 percent target in 4 years; $1.7 trillion if he reached it at the end of his second term. I noted, also, the remaining unknowns: what is included within the base budget, and GDP (I have deliberately used CBO projections, the most conservative – Obama/OMB and Romney believe that GDP will grow faster). I also note that a number of others, none of them obvious “Obama supporters”, have questioned Romney’s 4 percent promise, including Byron Callan, a defense industry analyst with Capital Alpha Partners LLC, and the Center for Strategic and Budgetary Assessment’s Todd Harrison.

Second, the two “caveats” at the center of Carafano’s supposition that Romney could achieve his goal by the end of his first term without increasing the deficit are more than that; on the contrary, the belief that Mitt Romney can achieve long-term entitlement reform and fundamental tax reform within the next four years strains credulity to the breaking point.

The fundamental reform of “long-term entitlement spending,” though badly overdue, is not seriously on offer by either Republicans or Democrats, and would not generate significant savings in the short term, in other words, by the time that Romney wanted to ramp up military spending. His spending, therefore, would grow the deficit, at least in the short term.

Equally dubious is the presumption that far-reaching tax reform – the elimination of some deductions in exchange for lower marginal tax rates – is likely any time soon. For starters, many fiscal hawks oppose any reform that results in higher revenue. More revenue, by definition, is a tax increase, something that is still verboten among most Republicans. And with good reason. “The American people know,” said Michelle Dimarob, spokeswoman for House Ways and Means Committee Chairman Dave Camp (R-Mich.), “when Washington politicians call for higher taxes it is to fuel more Washington spending.” “Americans,” Dimarob concluded, ”don’t want to pay more in taxes to bailout Washington.”

She’s right, and they don’t change their tune when the Pentagon is doing the spending. This study (.pdf, Q56) found that a plurality (including 52.2 percent of Republicans) are opposed to paying higher taxes in order to fund a still larger military. Other recent polls have found that Americans support military spending cuts (here, here and here), and barely one in four Americans (27 percent) believe that we should be spending more, according to a recent Rasmussen survey. In short, Pentagon spending boosters might succeed in pushing through a tax increase, but this would likely be unpopular with voters.

So, after all of this, I’m still left with two nagging questions: will Mitt Romney’s promise to spend more on the military win him votes? And, if he is elected, can he achieve his goal of spending 4 percent of GDP on the Pentagon without raising taxes or increasing the deficit?

Wall Street Journal: Romney Should Be a Neocon, but Hide It in Debate

Would you buy a foreign policy from this man?

Imagine a world in which the Iraq War had gone exactly as marketed. The United States invaded in March 2003. The Iraqis, with the help of Ahmed Chalabi, rapidly transitioned to become a stable, liberal democracy allied with the United States against Iran. The marvelous and smooth transformation had ripple effects throughout the region: a handful of Arab states followed suit, and the United States had drawn down to under 30,000 troops in country by September 2003, setting up a basing agreement with the new Iraqi government to stay indefinitely. Few American lives were lost, the swamp of terrorism was drained, and an oil pipeline has just been completed running from Iraq to the Israeli port city of Haifa.

Imagine, at the same time, that opponents of the war, despite having gotten every major judgment about the prudence and consequences of the war comically wrong, had been vaulted to positions of power and prestige in foreign affairs commentary. Meanwhile, the war’s proponents, despite their support for a strategy that yielded huge strategic dividends for the United States at a low cost, were banished to the wilderness, heard from sporadically on a few blogs and at a think tank or two.

It would be strange, wouldn’t it?

And yet that situation is roughly analogous to the one in which we find ourselves today, except in real life the war was an enormous disaster, just as its opponents predicted, and the proponents of the war are the ones in denial about its implications. Foremost among the salespeople for war who have yet to come to grips with the facts are the members of the Wall Street Journal’s editorial board.

But hey, let’s let bygones be bygones: they’ve got some advice for Mitt Romney in his upcoming foreign policy debate.

First, the good news: Even the editorial board of the Journal seems to understand that speaking openly about their plans for more wars would be bad politics. Accordingly, the Journal doesn’t “expect Mr. Romney to offer an explicit defense of the Bush Doctrine” and they worry about the implications of Obama charging Romney with wanting to get the United States into a third (and fourth) Middle East war. This is in keeping with the previous assurance of Bret Stephens (pictured above) that Romney wouldn’t start any new wars. Romney should deny wanting any more wars while doing a number of things that make them inevitable.

Second, the bad news: Instead of suggesting that Romney actually trim the neocon sail a bit, the article suggests Romney continue his strategy of wheeling out a fog machine and saying “leadership” and “strength” instead of discussing details. The American people who tune in Monday night deserve to hear some specifics. Not the level of specifics that would satisfy the people who think about international politics for a living, sure, but some specifics. Instead, while suggesting that Romney “offer[] a serious critique of Mr. Obama’s foreign policy that doesn’t descend to clichés,” the article suggests clichés but not seriousness.

This blends with the ugly news: like an insular clique of Bourbon royalty, the neocons at the Journal appear to have learned nothing and forgotten nothing about strategy over the last 10 years. To the extent their suggestions do go beyond clichés, they are a reminder that Bush-era neoconservatism still lies at the center of their world view, and the world view of the Republican establishment. A few examples:

  • The war in Iraq, we are informed, had “already been won when Mr. Obama became president.” Mission accomplished? Come again?
  • Obama turned that win into a loss by failing to secure “a viable alliance with Baghdad and a bulwark against Tehran.” When you have allocated yourselves 1,608 words, you may want to show your work about how this could have happened.
  • Another Obama failure is that he allowed Israel to have a partially independent defense strategy. He should have “provide[d] Israel with reassurances that it needn’t consider its own military options” on Iran. If Israelis should just rely on the United States to defend them from the most important threats facing their country, why does Israel have such a powerful military in the first place?
  • Obama’s “policies of premature military withdrawals [in Iraq and Afghanistan] have increased rather than diminished the chances that we will be at war in the Middle East again.” How? In which countries?

One could go on. But more broadly the piece suffers from the flaw that has characterized the whole foreign-policy discussion in the election: the idea that the outside world begins at Algeria and ends at Afghanistan. The sprawling essay says exactly nothing useful when it comes to the most important foreign policy challenges facing the United States: the prospect of a European implosion, the wreckage of our war on drugs in Mexico, and preventing American entanglement in a prospective World War III in Asia.

The essay closes by invoking Robert Gates’s invocation of Ronald Reagan, who said that he had lived through many wars but none of them began because the United States was too strong. Gates and the WSJ’s editorial board probably ought to think a little harder about whether the United States blundered into any costly quagmires as a function of its overweening strength and insulation from the costs of its strategic choices. The answer is obvious.

‘Dems and GOP Agree, Government Needs More Money’

That’s the (fair) title of this blog post over at National Journal’s Influence Alley:

The federal government needs more money. That’s one thing both parties can agree on, Republican and Democratic lawmakers said Tuesday. The rub, of course, is how to get it.

Reps. Peter Roskam, R-Ill., and Allyson Schwartz, D-Pa. said at a National Journal panel on Tuesday morning that there’s no question that more revenue is needed. Democrats say they can raise the money by letting upper-income tax cuts expire, while Republicans say economic growth alone will help raise the cash.

“We need more revenue,” said Roskam, the House GOP’s chief deputy whip. “If you can get the money to satisfy obligations, that’s an area of common ground.”

Let’s hear it for duopoly, eh, comrades? Without it, we might suffer political parties that question whether those government “obligations” are wise, or necessary, or constitutional; or that point out governments don’t have needs, people do; or that reject the premise that politics is an exercise in deciding who needs what; or that argue for eliminating entire spheres of government activity. Can you tell I’ve just watched a presidential debate?

Newsflash: Politicians Pander to Agriculture!

The American Soybean Association (ASA) recently asked each of the presidential candidates to respond to a series of questions about agricultural policy issues. The questions covered farm bill and crop insurance, estate tax, biodiesel, biotechnology, trade, research, regulations, and transportation and infrastructure. The candidates’ responses (full text here) were not exactly models of courageous and principled policymaking.

I won’t parse the entire thing, as it is just too depressing and some of the issues (e.g., the estate tax) fall outside my area of research. But I will comment on a couple of the topics.

On subsidies and crop insurance, both candidates pledged to support passage of the farm bill, and the crop insurance and disaster provisions it contains. Mr Romney—no Senator John McCain in this area, at least—went on to make a broader statement about his philosophy on farm supports:

On the broader question of farm programs, we must be cognizant that our agricultural producers are competing with other nations around the world. Other nations subsidize their farmers, so we must be careful not to unilaterally change our policies in a way that would disadvantage agriculture here in our country. In addition, we want to make sure that we don’t ever find ourselves in a circumstance where we depend on foreign nations for our food the way we do with energy. Ultimately, it is in everyone’s interest is achieve [sic] a level playing field on which American farmers can compete.

Ugh. That is a monumentally awful statement. First, not all nations subsidize their farmers. New Zealand and (not to brag) Australia, for example, subsidize their farmers very little, and in very minimally distorting ways, and yet their agricultural  exports generally are thriving. They compete with other agricultural exporters because they try to be the best they can be given their natural resource endowments, research, experience, and human capital.  Second, the caution against unilaterally changing policies is, of course, ubiquitous in many trade policy statements (see, e.g., Ex-Im Bank, manufacturing, reducing tariffs generally). It is also economically insane to enact bad policies because other countries do so. Especially when it is becoming clear that other large agricultural subsidizers (e.g., Japan and the EU) are not exactly thriving, many and varied though their problems may be.

Third, as for the importance of farm supports in maintaining food independence, that’s also nonsense. As I’ve argued ad nauseum, (e.g., here), subsidies aren’t keeping us well-fed: if food abundance depended on government support, we’d see nothing but so-called program crops (soybeans, wheat, corn, cotton, and rice) on supermarket shelves. Judging by the size of my fellow Australians on my last visit home, no-one is starving there despite very little government support for agriculture. By the way, if you want to read some comments from a president who actually knows what he is talking about, read Indonesia’s President Susilo Bambang Yudhoyono’s comments in this article, where he calls for lower trade barriers around the world, particularly for food security reasons.

Mr. Romney’s support for the Senate-passed farm bill also is at odds with his statement to the ASA about the importance of open trade. Even putting aside Mr Romney’s typical mercantilist obsession with exports, I wonder if he realizes that the changes proposed in the Senate farm bill would increase the amount of subsidies deemed trade-distorting by the World Trade Organization, putting trade liberalization at risk? U.S. government spending on trade-distorting support, the “worst” kind, is at record lows right now, mainly thanks to higher commodity prices. But even a senior United States Department of Agriculture official admits (paywall) that the proposed changes to farm policy—including a move towards revenue insurance—would likely see that progress eroded:

But Joseph Glauber, chief economist at the U.S. Department of Agriculture (USDA), said in an interview with Inside U.S. Trade that if either the Senate-passed farm bill or the version approved by the House Agriculture Committee were enacted, that would likely increase the level of U.S. trade-distorting payments.

While stressing that his assessment is preliminary in light of the fact that no legislation has been finalized, Glauber said it is fairly apparent that cutting direct payments and replacing them with either a revenue guarantee program or a price-loss program, as the two legislative proposals envision, would lead to an increase in amber box payments.

In fact, Glauber argued that changing U.S. farm policy along the lines of either of the farm bill proposals could make it more likely that the U.S. exceeds the $7.6 billion cap to which the U.S. informally agreed in the Doha round, especially in those years where commodity prices dip down and subsidy payouts increase.

Pass the farm bill, in other words, and multilateral liberalization efforts get more difficult.

Finally, I note that Mr. Romney also couldn’t resist adding his standard, wrongheaded, and increasingly prominent talking point about “vigorously enforcing” U.S. trade law, and catching cheaters (plenty of blog posts by my colleagues on this topic can be viewed on this blog). I wonder if he realizes that the United States itself has been caught breaking the rules of agricultural trade, and how hypocritical his statements about farm subsidies and trade are in that context? Plenty of damage, and retaliation, has been unleashed because of various ways the U.S. government conducts its affairs in agriculture.

So, in short, there is not much to like in either candidate’s statements, with Mr. Romney deserving special opprobrium because of his professed free-market, limited government principles. But we knew that.

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