Why Romney’s Deficit Vow Is Shallow

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Mitt Romney DeficitWASHINGTON — Mitt Romney promised voters Thursday night that he would cut deficits and put America on track to a balanced budget as president, but he left voters to take it on faith – or not – that he could deliver. The details behind that pledge, and the painful spending choices involved, are conspicuously lacking in his agenda.

No one would expect a presidential nominee’s acceptance speech, a tone-setting introduction of the candidate before a huge TV audience, to march through the nitty gritty of a budget. Such speeches are meant to soar and generalize. But the specifics don’t exist anywhere else and, without them, there’s no telling how he could increase military spending, cut taxes, restore over $700 billion to Medicare, meet the government’s core obligations – and bring down deficits.

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A closer look at some of Romney’s claims in excerpts of his remarks released before his speech closing the Republican National Convention in Tampa, Fla.:

ROMNEY: “To assure every entrepreneur and every job creator that their investments in America will not vanish as have those in Greece, we will cut the deficit and put America on track to a balanced budget.”

THE FACTS: Romney has promised to cut $500 billion per year from the federal budget by 2016 to bring spending below 20 percent of the U.S. economy, and to balance it entirely by 2020. But he’s remarkably vague on how he would do that. He has offered ideas like repealing President Barack Obama‘s health care law, which is actually projected to save money overall, and cutting smaller areas of government spending such as foreign aid and Amtrak subsidies.

Some of his priorities, such as increasing military spending and reversing $716 billion worth of Obama’s cuts to Medicare, would make the job more difficult. Romney has steered clear of proposals to touch Medicare and Social Security in the short run, which leaves a relatively limited portion of the $3.6 trillion federal budget to cut.

He’s also proposed to cut tax rates while ending some deductions and exemptions, but he hasn’t detailed which ones. Deductions that are hugely expensive for the government to provide – like the mortgage interest and charitable deductions – are also hugely popular.

ROMNEY: “That business we started with 10 people has now grown into a great American success story.”

THE FACTS: Bain Capital is indeed a success story. But the story of the companies it invested in is more complicated. Romney mentioned his usual examples of companies that started or prospered in his career as a venture capitalist – the national Sports Authority and Staples chains, and Steel Dynamics in Indiana.

Equally selectively, Obama’s campaign cites only the Romney-shepherded deals that closed companies or otherwise cost jobs.

A new Romney website, devoted to his record at Bain, states “the businesses Romney helped start while at Bain Capital employ more than 100,000 people today.” But like the candidate himself, it doesn’t subtract job losses during his time at Bain Capital and it doesn’t make clear that much growth came years after he left – as did some job losses than Obama blames on his rival.

Georgetown, S.C.,-based GS Industries was one such company that Bain bought in the mid-1990s. In 2001, the steel mill filed for bankruptcy and was tied up in lawsuits from local residents alleging the plant polluted their historic town. Romney blamed the bankruptcy on Chinese dumping cheap steel into the U.S. market, although Bain ultimately realized more than $30 million on its investment, according to financial documents.

At another Bain-owned South Carolina company, the Holson Burnes Group Inc. in Gaffney, about 150 workers lost their jobs as some plant operations were sent up north – and later overseas. By 2004, a prospectus showed Bain saw a $33.8 million valuation on its initial investment.

Steel Dynamics quickly became a leader in the production of flat-rolled steel, expanding to other locations in the U.S. and Mexico, reaping $8 billion in sales in 2011. Bain’s five-year investment paid off, and when the Bain cashed out in 1999, it left with an 82 percent rate of return on its $18 million investment.

But the steel mill received $37 million in state and local tax incentives to build in Indiana, and nearby residents were subject to a special income tax levy to support the project. That part of the story does not fit well with the Republican convention’s “We built it” mantra that business, not government, grows jobs.

ROMNEY: “I have a plan to create 12 million new jobs. It has five steps.”

THE FACTS: No one says he can’t, but economic forecasters are divided on his ability to deliver. He’d have to nearly double the anemic pace of job growth lately.

That’s conceivable in a healthy economy. Moody’s Analytics, one financial research operation, expects nearly that many jobs to return over the next four years no matter who occupies the White House, provided there are no further economic bumps. Other analysts have questioned Romney’s rosy job promises.

Romney’s steps include deficit cuts that he has not spelled out, and a march toward energy independence that past presidents have promised but not delivered. Unlike Obama, he does not support curbs on demand; namely the much higher mileage standards that are coming into effect. Romney proposes boosting supplies, with freer access to development of oil, gas, coal and more. Independent energy analysts say supply and demand both have to be in the equation for energy independence to be achieved.

ROMNEY: “President Obama promised to slow the rise of the oceans and to heal the planet.”

THE FACTS: Really?

Yes, pretty much.

In a June 2008 speech marking his victory in the Democratic primaries, Obama said generations from now, “we will be able to look back and tell our children that … this was the moment when the rise of the oceans began to slow and our planet began to heal.”

Obama backed a climate-change bill that passed the House in 2009. A similar bill died in Senate in 2010. Opinion is mixed whether he worked hard to get it passed.

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