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Monday, September 26, 2016

Taking Apart ‘The Romney Program for Economic Recovery, Growth, and Jobs’

Taking Apart ‘The Romney Program for Economic Recovery, Growth, and Jobs’

A point-by-point response to Romney economic advisors Kevin Hassett, Glenn Hubbard, Gregory Mankiw, and John Taylor, authors of  “The Romney Program for Economic Recovery, Growth, and Jobs” — also known as HHMT (abridged from the blog of J. Bradford deLong, Berkeley economics professor and former Deputy Assistant Treasury Secretary for Economic Policy).


HHMT: We are presently in the most anemic economic recovery in the memory of most Americans, with significant joblessness and long-term unemployment, as well as lost income and savings.

WRONG: We are in the worst downturn, but we are not in the “most anemic” recovery–the recovery of 2001-2004 was more anemic. HHMT should know:  Three of them held high federal office in the George W. Bush administration that managed that recovery, and back then all four attempted (unconvincingly, in my humble opinion) to rebut claims from people (like me) that the early 2000s recovery was anemic and that more stimulative policies were then needed.

Why don’t HHMT make the true claim that we are in the worst downturn? Why do they make the wrong claim that we are in the most anemic recovery? Because they do not want to talk about how back when they were in office, they played their role in failing to use their leverage to argue for more expansionary fiscal and monetary policies to speed the then-recovery.

Why weren’t HHMT arguing, back in 2001-2004, either inside or outside the government, for more expansionary fiscal and monetary policies to speed the then-recovery? I don’t know.

Those of us who were so arguing would have found their help most welcome.


HHMT: The Obama administration says that the economy’s awful performance reflects the reality of the aftermath of a financial crisis and that the administration’s policies generated what little recovery we have seen from the severe 2007-2009 recession – Americans should stay the course. But the historical record is clear: Our economy usually recovers quickly from recessions, and the more severe the recession, the faster the subsequent catch-up growth…

DOES NOT FOLLOW: The argument that recovery is highly likely to be slow in the aftermath of a financial crisis is a powerful one—made by many who are not Obama administrationflunkies, including the well-respected Reinhart and Rogoff (2010) and the International Monetary Fund (2011). Their “But” sentence does not rebut this powerful argument—although HHMT mean for their readers to think that it does.


HHMT: The Romney economic program will change the direction of policy to focus on economic growth. Its pro-growth effects will work in two basic ways: It will speed up the recovery in the short run, and it will create stronger sustainable growth in the long run.

WRONG: There is no Romney program—a program is complete, coherent, and scoreable; Romney has repeatedly said that his statements are not scoreable. In order to estimate the economic effect of any program, you have to know what its pieces will do–you need to have it scored. Until Romney presents a complete and coherent program with scoreable pieces, HHMT have no basis for asserting anything about its economic impact.

One of the most annoying things here is the partisan asymmetry: the rules of the game seem to be that Democratic proposals have to be scoreable and coherent, while Republican proposals don’t.

It would have been very nice if HHMT had done what we Democratic economists do–told their political masters that they could not estimate economic impacts until they were given a coherent, complete, and scoreable plan.

Why they did not do this I do not claim to know.


HHMT: Declines in business investment and employment were particularly sharp in this recession. Far from being a lightning bolt hitting a smoothly running economy, the crisis was exacerbated by structural biases against business investment (from the tax code and regulation), financial imbalances (particularly fueled by biases against private saving and by the need to borrow abroad to finance our government deficits), and regulatory choices (excessive promotion of housing investment and inadequate attention to existing financial regulations and the rise of and consequences of shadow banking). No single party or administration is responsible for structural headwinds to growth, but the Obama administration’s errors and choices exacerbated the economy’s structural problems and weakened the recovery.

FRED Graph  St Louis Fed 1

DOES NOT FOLLOW: The argument that America has over the last two decades suffered from structural biases against business investment in categories like equipment and software simply does not follow at all. Business investment grew at a very healthy pace during the Clinton administration—and has grown twice as fast under Obama as it did in the years of what National Review used to call the “Bush Boom”.

The pieces of autonomous spending that are right now far below the values seen before the crisis and the downturn are (i) primarily residential construction, and (ii) secondarily government purchases–these are the results of a broken housing finance system and of Republican austerity programs, not of an anti-business climate.

The pieces of autonomous spending that are responsive to the business climate–the willingness of businesses to purchase equipment and the confidence of businesses that make them willing to export–are doing just fine right now. If residential construction and government purchases were doing as well, we would be out of this current mess.

  • …after the debates, I do not think anyone will need much urging to realize they can not vote for Mitt Romney…he will flail like a fish and end up in the corner with a dunce hat firmly in place…

  • There is no question that we still have economic and fiscal problems, but an economy that adds 163,000 jobs in one month, most of them in manufacturing, is not anemic, and a country where corporations are posting record profits, and the stock market is at record highs is far from being anemic. The picture the GOP has been trying to paint, which makes us think Americans are dropping like flies as a result of President Obama’s policies contrasts with what most of us see in our neighborhoods, workplace, and everywhere we go. There are new cars in most of my neighbors driveways, one is in London and another went on an Alaskan cruise, restaurants are packed, the lines in Disney are interminable, and cruise ships are booked to capacity. BTW, I live in a typical middle class neighborhood in suburbia. Many stores are posting hiring signs, and according to the Labor department there are one million vacancies for truck drivers. Job and business opportunities in places like North Dakota and Montana are plentiful. Admittedly, most of us don’t have car elevators in our houses or dressage horses, but give me a break, things are not as bad as Romney and his cohorts want us to believe. If this is economic Armagheddon I’ll take it any time. Those of us born in the 1930s or 20s remember what real economic trouble means, don’t try to sell us this bill of goods.

  • howa4x

    The corporations are sitting on billions and not investing. First they said they were unsure of what was going on in health care reform, then waiting until the supreme court confirms it. Now it’s the European debt crisis, and low volume of exports and trying to add leverage for the Bush era tax cuts to them the wealthy. to continue. It is also about locating their business outside the US like Cisco being an Irish company and Halaburton being a Dubai company to avoid corporate taxes. Then there were patriots like Romney that hid their money in off shore accounts, failing to invest his 250 million here, and prefered to incorporate in Bermuda. All of this slows recovery and slows job growth.

  • Gammaanya

    I have posted before , and I wil say it again, As a CPA, it takes money to make money. That been said, now under the circumstances (filibustering) the job growth is still pretty good. If you have enough time to sit at the bar and complain how bad life is under Obama etc. start searching Internet’s job sites for job. Sears have zillions openning, Insurance companies are hiring because of ACA it does create jobs, more claim clerks, more doctors etc,etc. Walgreens is restructuoring and they are hiring, I have clients that asking me to spread the word that they have few openings and if I know anybody qualified. Yes, there are jobs, but you have to get off your tush and apply. Your unemployment will run out (I do not agree with the extention on payroll taxes – it’s a band aid and actually benefits the employer not employee) and don’t expect extention. It’s not going to happend. If for ONCE they approve 2 bills that sits on Boehner desk, we would be in faster recovery. It’s infrastructure and Agriculture bill. They are attaching a bunch of little stipulations that benefits the Rich (they have to get the best ROI for all the money being pumped) and Dem’s will not have it. It’s is to say we pass the bill but Dems did not accepted. Why should the Dem accept when is says that to get this bill passed you have OK the Keystone Pipeline (it would be a disater). If you have acces to library get acopy of Rolling Stone Magazine with Whitney Houston on the cover. They have interview with the Fracking guy and what they are doing – DISGUSTING and how he made his millions. CHeasapeke Energy or something. Everything Obama puts on the table have strings attached for the rich, lobbyists at the door pouncing. Shame. What happene to our DEMOCRACY. It become a dirty word. AUTOCRACY is more like it. SHAME.
    SEMPER FI Veteran’s please don’t give up on your country, few of us truly care. Your scrifice and the fight for democracy is duly noted and appreciated.
    By the way NEVER sign up to any private College on your GI Bill – that degree will get you nowhere and is expensive and they making money on your money (taxes). I will post the most reputable Colleges where you get the best deal. Waiting for some info.
    Just got it in the mail a letter begging for at least $25.00 donation (mimimum) from Judicial Watch and Heritage Foundation. As a business owner I DON”T donate to ANY party, because I don’t believe that money should influence my vote. My vote is not for sale for any price. It’s my most precious right to have and I use it wisely, I vote on issues not parties. NO matter what color, religion or education, straight or gay or in between – I vote for the person who PUTS COUNTRY AND IT’S CITIZENS FIRST, not the rich and powerful on my dime.Put aside your racial vices and put your Country First.

    • My youngest son works for a small manufacturing company in Maryland, the company has been buying new equipment and hiring to keep up with demand, and when my son talks to their customers most ask him if he knows anyone to fill the vacancies they have. My eldest son works for a very large software company, they have also been hiring, but because of the nature of their work and the qualifications required to fill their vacancies many of their new hires are foreign professionals, mostly from India. The economy is a lot stronger than people think, and I would not be surprised if unemployment drops to the 7.8% that existed when President Obama was inaugurated within the next few months.

      • Gammaanya

        Dominick, my son works for Boeing and they desperately need good people to work on the Dreamliner. They can’t get good people, most who comes to apply are people without any qualification to even flip burgers at McDonalds. Some come dirty and smelly and drunk. Some just want a job and a paycheck because their unemployment run out and it’s Obama fault. Even if God was in the WH would get blame for their lack of work. I deal with a lot of businesses and it break my heart to see how some people who just barely make it, a hard working people and they pay the 2-30% tax and here is a millionaire with more money than brain and some Corp. and they don’t pay a penny, they get money back. I do it because it’s my business. I wish people REALIZE what truly goes with these big Corp. and yes the small business pay higher taxes than Romney, Koch Bros, Thiel, Adelson etc.
        When people will start understanding the tax codes and basic accounting and how Bush/Cheney gang rip of the Country they would be shocked.
        It’s best to listen to experts but not from Faux News, Rush, Hannity, these guys gets paid millions to spew nonsense, half truths enough for a ignorant lemmings to believe. SAD. You do understand WHAT truly brought this country down.
        I just wonder how none of them ask what had happened to the money that Clinton left, and why they did not pay for the 2 wars and Part D. medicare and the $300—600 stimulus that was also run on credit. Who got better deal?? the 600 check for the little people or the 1% with tax breaks and created nothing?????
        People have selsctive memory and it’s not due to being plain stupid but also due to being racist. Just look how Newt is flip flopping, watch Santorum praising Romney etc. Just enjoy the show and shake your head and wonder what wrong with this country?? They talk about socialism (Medicare, AKA, Public Ed, SS are socialistic Programs), communism,, community organizer etc but NONE truly know what that means, but they will repeat it because sounds smart. LOLLOL.
        You get my drift.I enjoy your posts.

  • ObozoMustGo

    A personal favorite. I hope you enjoy..

    The Gods of the Copybook Headings
    Rudyard Kipling

    As I pass through my incarnations in every age and race,
    I make my proper protestations to the Gods of the Market-Place.
    Peering through reverent fingers I watch them flourish and fall.
    And the Gods of the Copybook Headings, I notice, outlast them all.

    We were living in trees when they met us. They showed us each in turn.
    That water would certainly wet us, as Fire would certainly burn:
    But we found them lacking in Uplift, Vision, and Breadth of Mind,
    So we left them to teach the Gorilas while we followed the March of Mankind.

    We moved as the Spirit listed. They never altered their pace,
    Being neither clud nor wind-borne like the Gods of the Market-Place;
    But they always caught up with our progress, and presently word would come
    That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

    With the Hopes that our World is built on they were utterly out of touch.
    They denied that the Moon was Stilton; they denied she was even Dutch.
    They denied that Wishes were Horses; they denied that a Pig had Wings.
    So we worshiped the Gods of the Market Who promiced these beautiful things.

    When the Cambrian measures were forming, They promiced perpetual peace.
    They swore, if we gave them our weapons, that the wars of the tribes would cease.
    But when we disarmed They sold us and delivered us bound to our foe,
    And the Gods of the Copybook Headings said: ‘Stick to the Devil you know.’

    On the first Feminian Sandstones we were promiced the Fuller Life
    (Which started by loving our neighbor and ended by loving his wife)
    Till our women had no more children and the men lost reason and faith,
    And the Gods of the Copybook Headings said: ‘The Wages of Sin is Death/’

    In the Carboniferous Epoch we were promised abundance for all,
    By robbing selective Peter to pay for collective Paul;
    But, though we had plenty of money, there was nothing our money could buy,
    And the Gods of the Copybook Headings said: ‘If you don’t work you die.’

    The the Gods of the Market tumbled, and their smooth-tounged wizards withdrew,
    And the hearts of the meanest were humbled and began to belive it was true
    That All is not Gold that Glitters, and Two and Two make Four—
    And the Gods of the Copybook Headings limped up to explain it once more

    As it will be in the future, it was at the birth of Man—
    There are only four things certain since Social Progress began:—
    That the Dog returns to his Vomit and the Sow returns to her mire,
    And the burnt Fool’s bandaged finger goes wabbling back to the Fire;
    And that after this is accomplished, and the brave new world begins
    When all men are paid for existing and no man must pay for his sins,
    As surely as Water will wet us, as surely as Fire will burn,
    The Gods of the Copybook Headings with terror and slaughter return!

    Have a nice weekend!

    “Socialism is a philosophy of failure,
    the creed of ignorance, and the gospel of envy,
    its inherent virtue is the equal sharing of misery..”
    — Winston Churchill

  • My compliments to the author of the piece. Very informative and backed up with facts. Refreshing reporting.

  • clarenceswinney

    Success-Failure solutions
    1945-1980 Democrats worked hard in creating the successful middle class
    that had jobs which afford home ownership, education, health care and a decent standard of living. Unemployment was almost non existent.

    Since 1980, it has been decades of loading them with debt in order to afford a middle class life style. Since 1980, the top 1% had a 281% increase in after tax income. The middle 20% had 25% or less than inflation. The wealthy had the money to loan so got richer and richer.

    The Outsourcing of our manufacturing industries was biggest hit on the middle class and decent paying jobs.
    The Tax Code got loaded with goodies for the rich and corporations

    There is a series of solutions to reverse course before we go over the cliff

    Progressive Flat Tax By Group. Tax Total Income not AGI with the loads of exemptions.
    Assure a progressive flar tax that will balance our budget and start paying down that horrid Republican created debt of $15,900B.

    Fed fund campaigns and elections. No personal our outside money. Six months. 3 primary 3 general. Free equal tv time. Debate a week=12=adequate to evaluate candidates.

    Since no need to campaign for money keep em on the job off the road.
    BAN all federal employees form taking anything with a financial value.
    This closes K Street Bribery

    It gives the middle class a chance to win offices since the votes cannot be bought.

    Burn that tax book—It yields enough $1100B to balance the budget and pay down some debt.
    Start anew. Exemptions must serve a common good not fat wallets
    clarence swinney burlington nc

  • onedonewong

    After running up a debt of $10 Trillion and unemployment in excess of 15% any economic policy has to be better than what we have just gone thru. Delong is a liberal HACK from Berkley who thinks Keynesian is the be all even though that has been the govt policy since 1990 and has produced a lack luster economy