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Romney's debate performance was based on fantasy economics
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Mitt Romney performed well in the debate last night. Too bad most of what he said is based on fantasy. With a $16 Trillion national debt, a $1 trillion budget deficit, tax rates at unsustainably low levels, and tax revenues at all-time lows, it is impossible for Romney to cut taxes further without adding to the national debt.
Ronald Reagan followed Mitt's plan. And it worked. It pulled the country out of the stagnation of the 1970s. But Reagan also began adding to the national debt for the first time since the end of World War 2. If Reagan's policies had been a short-term stimulus with a return to fiscal responsibility during his second term, he would have been one of the greatest Presidents in our nation's history. Instead, he doubled down on his fiscal recklessness during his second term and laid the foundation for our current fiscal crisis. The national debt when Reagan took office was $1 trillion and about 33% of GDP.
George H.W. Bush and congressional Republicans did a lot of hand-wringing about the growing national debt but did nothing to stop it. Trickle-down economics, an unsustainable system in the long run, ran its course and the country was hit with the recession of 1991 that cost Bush reelection. When Bush left office, the national debt was $4.5 trillion and over 65% of GDP. Reagan and Bush broke a 30-year streak of Presidents who paid down the national debt as a percentage of GDP.
Clinton took office and immediately raised taxes and began working with the Republican Congress to balance the budget. After six years and unprecedented economic growth, he balanced the budget. When the tech bubble burst in 1999, the country was on solid fiscal ground for weathering the storm without any serious long-term effects. When he left office the national debt was $5.5 trillion and 58% of GDP--the largest reduction as a percentage of GDP for any President since Eisenhower.
Then came the disaster of George W. Bush. He immediately returned to the policies of Reagan and his father. He cut taxes and, in one year, turned a modest budget surplus into a $150 million deficit. His deficit spending never stopped. The presumption that his tax cuts would stimulate economic growth and, therefore, increase tax revenue to make up the difference never materialized. George W. Bush presided over the slowest period of economic growth since the Great Depression. This came to a head in 2008 when the housing bubble burst and GDP contracted by 9%. The 2009 budget, still based on Bush's policies, featured a deficit of over $1 trillion for the first time in our nation's history. When GW Bush left office, the national debt had almost doubled to $10.5 trillion. It rose to 88% of GDP--giving Bush 2 the biggest increase in debt of any President. Trickle down economics failed again.
Obama inherited the biggest financial mess since FDR took office after the Coolidge/Hoover disaster of the 1920s and early 1930s. Unfortunately, Obama was short on ideas and short on the leadership skills needed to assert himself was the leader in Washington. The debate last night was a microcosm of Obama's shortcomings. Stupidly, he kept most of Bush 2's policies, including his tax cuts--causing some to label Obama as a "Moderate Republican in Democrat's clothing." He has done a terrible job with the economy. And while Obamacare will help to bring the United States back in to the modern world in terms of providing health care coverage to the country's citizens, and while he has been absolutely masterful in terms of foreign policy, his domestic policy has been seriously lacking. He has added $5.5 trillion to the national debt. But growth of the debt has leveled off at 105% of GDP and is not expected to rise significantly. Obama's sensible approach to cutting spending while returning to Bill Clinton's tax rates will begin the long, slow process of digging the country out of the fiscal hole it is in.
Which brings us to today. If history repeats itself, then it will take 30 years to pay the debt down to 33% of GDP, as it did from 1950 to 1980. Then Reaganomics stepped in and started this whole ball of debt wax.
Mitt Romney's plan is based on the fantasy that the economy will grow at a certain rate to make up for all of the new tax cuts that he plans to add. Mitt Romney plans to pay for the cuts by closing tax loopholes. But, as Obama said last night, though not very forcefully, there are not enough tax loopholes in the upper reaches of the tax bracket that can be closed so that middle-class Americans do not face tax increases in the form of doing away with the home-mortgage deduction and other "loop holes" that are used by regular folks. Not only will Romney's plan shift the tax burden from the wealthy to the poor, his assumptions of economic growth to increase tax revenue will fail. Just like they failed for Reagan. Just like they failed for Bush 1. Just like they failed for Bush 2. Romney's plan is based on fantasy. If you enjoy fantasy, vote for Romney. When you wake up, the country--if it still exists--will have a $30 trillion national debt that is 130% of GDP. And that's only if Rmoney doesn't start a war with Iran that evolves into World War 3. Which is exactly what he appears to be planning. Especially considering his close friendship to Bibi Netanyahu since the 1970s.
Sure, Romney won the debate last night by being aggressive and sounding sure of himself. But his policies will lead us over a cliff that there's probably no coming back from.
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