The Question I Want to See Asked Tonight

October 16, 2012Danny Vinik Leave a comment

It goes to Romney:

Are there any tax expenditures on savings and investment that you would eliminate or reduce and if so, what are they?

If the answer, is no, well then the math simply does not add up for his plan to be feasible.

But if the answer is yes, then things get more interesting. The Tax Policy Center’s analysis of Romney’s tax plan found that it either had to raise taxes by $86 billion on the middle class or else not be revenue neutral. The numbers couldn’t add up.

But Alex Brill at the American Enterprise Institute dug into the numbers and found some areas where Romney’s plan could possibly gain revenue without raising taxes on the middle class. Some are legitimate complaints. Some aren’t.

In Brill’s analysis, the numbers come out to a $1 billion tax cut for the middle class. But it includes the specific assumption that Romney will eliminate tax deductions for high earners on savings and investment. Specifically, Brill and AEI colleague Matt Jensen found $45 billion from the exclusion of interest on state and local bonds and the exclusion of inside buildup on life-insurance products. But, these are tax exclusions on savings and investment.

If Romney refuses to eliminate those exclusions, then even under the AEI analysis, the math doesn’t add up. It’d be a $44 billion tax increase on the middle class.

So, which is it Governor Romney, eliminate those tax exclusions or raise taxes on the middle class?

A Referendum on Campaigning

August 18, 2012Danny Vinik Leave a comment

I’ve been away from the blog for a bit the past week, enjoying the end of my summer and I wanted to stay away from the Paul Ryan show. The blogosphere has covered him and the Ryan Budget profusely so I don’t have much to add. More and more I believe that his election is not going to be that close. Obama won’t win by as much as he did in 2008, but I just don’t see it being all that tight and Romney’s selection of Paul Ryan as his running mate has only strengthened my view. Why? Because Ryan is controversial, his budget isn’t popular and he’s just not as wonky as people think. Real Clear Politics’s excellent conservative blogger Sean Trende said as much in his article evaluating Romney’s choice.

But let’s assume for a second that Obama does win by a decent margin. Such a victory is important not just because it allows the President and Democrats four more years to implement their policies. It is also important because it sends two positive messages for futures campaigns:

1. Money doesn’t buy elections. Obama will get outspent handily in this election. There’s no doubt about that. But what if all the tens of millions of dollars that Sheldon Adelson puts in to Romney’s campaign becomes worthless? What about all the other big money donors? If Obama wins relatively easily, maybe next time, they will be more hesitant in opening their wallets. This matters less for the presidential election than for down ticket races. In the end, those down ticket races are where money matters. If we can remove some of the money from those races – where Republicans have a huge advantage in cash – it will be a big victory for the country. Right now, too many candidates just don’t have a chance because they just don’t have the resources. How many moderate Republicans has the Club for Growth taken out with their vast swaths of money? Well, maybe an Obama win can help reverse this trend. It certainly can’t hurt.

2. Vagueness doesn’t work either. I feel bad for Romney. He has so little to run on now because the Republican party has lurched so far to the right. And to make up for that, Romney has been incredibly vague in all of his policies. In fact, they can barely be called policies. This cannot be the standard for presidential campaigns. Candidates need to lay out their platforms and allow the media and public to judge them. Right now, Romney isn’t allowing this happen. Ultimately, I don’t believe Romney really had much of a choice, but an Obama win would certainly ensure that future candidates cannot just skirt the issues. (More on this to come).

Many pundits have declared that Romney’s selection of Ryan will make this election “about the issues.” Yes and no. Yes, voters around the country will be able to read countless articles on Obama’s policies and the Ryan Budget. They will get a chance to vote on the issues. But for those of us who follow Washington closely, there isn’t really anything new. Both Obama’s policies and the Ryan Budget have been thoroughly dissected. Ultimately, there’s just not that much more policy-wise to add to the discussion. Now, the election is all about messaging those plans to the voters.

But this election is also a referendum on what works in campaigns. Does a huge money advantage ensure victory? What about vague policies? What about both of those in the midst of a weak economic recovery? The framework for future campaigns lies with the answers to these questions and it’s important that future campaigns aren’t run to maximize money and minimize serious policy proposals. For those reasons, an Obama victory offers more than just a victory on the issues (as would a Romney victory). It offers a victory on how to campaign. And since I believe Romney’s selection of Ryan will only increase the chances of the President winning a second term, I’m certainly happy with Romney’s choice.

Glen Hubbard: Deliberately Misleading Readers

August 2, 2012Danny Vinik 2 Comments

Romney economic advisor Glen Hubbard penned an op-ed today in the Wall Street Journal that is rather infuriating. Let’s look at Hubbard’s first assertion on policy uncertainty:

In response to the recession, the Obama administration chose to emphasize costly, short-term fixes—ineffective stimulus programs, myriad housing programs that went nowhere, and a rush to invest in “green” companies.

As a consequence, uncertainty over policy—particularly over tax and regulatory policy—slowed the recovery and limited job creation. One recent study by Scott Baker and Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago found that this uncertainty reduced GDP by 1.4% in 2011 alone, and that returning to pre-crisis levels of uncertainty would add about 2.3 million jobs in just 18 months.

To the study we go! Here’s the graph of economic policy uncertainty:

Uncertainty rose a bit during the stimulus debate, though that also coincided with the crisis as a whole and TARP occurred right as Lehman Brothers collapsed. It’s certainly not fair to say that those policies did not cause any uncertainty – any policy change is going to make things more uncertain. But look what is responsible for “this uncertainty [that] reduced GDP by 1.4% in 2011 alone.” It’s the debt ceiling dispute! And who was responsible for it? The Republicans! They held the economy hostage for months. That 1.4 percent reduction is exactly what Obama tried to avoid by repeatedly calling for a clean increase of the debt ceiling. Yet, Hubbard is trying to lay the blame on the President! (And by the way, can we stop with this “ineffective stimulus” idea already? It wasn’t.) Continue reading “Glen Hubbard: Deliberately Misleading Readers” →