Romney: Spending Cuts Will Kill the Economy
If you've read one Paul Krugman column, you've read them all. Alongside his unabating clarion call for ever more stimulus spending, Krugman decries spending cuts of all sizes, shapes and colors, and despises the idea of a balanced budget. This clip just about sums up his entire body of work since 2007, and encapsulates the Obama administration's approach to the economy for the duration of his term in office.
Leading the charge to slash spending, on the other hand, Paul Ryan has repeatedly made the case that we face a crushing burden of debt which must be addressed right away lest we hit the point of no return.
And where does Candidate Romney fit into the mix? Speaking today in Shelby Township, Michigan, Gov. Romney situated himself in the Krugman school of economics. "If you just cut, if all you're thinking about doing is cutting spending, as you cut spending you'll slow down the economy," Gov. Romney stated. "So you have to, at the same time, create pro-growth tax policies."
Though Krugman and Romney agree that spending cuts would worsen the economy, there is, to be sure, a major distinction between the conclusions each man draws. According to Krugman, spending cuts are bad; therefore, we must increase spending. Romney has stated that spending cuts, if not coupled with pro-growth tax policies (which he plans to outline this week, incidentally), would be lethal.
But is the underlying assumption here that spending cuts on their own would slow down the economic recovery a correct one? If Krugman, Obama, and Romney are correct on this, then Paul Ryan and his emphasis on spending cuts have been folly.
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Re: Romney: Spending Cuts Will Kill the Economy
Leigh: After reading the article, the context, and the follow-up clarification from Romney's spokesman, it isentirelypossible that all he was trying to say is that tax reform is necessary for growth, and that he slightly misspoke. It's fuzzy.
That is not quite the same as "spending cuts will kill the economy."
He is certainly notmaking an argument against cutting spending...He's arguing for pro-growth tax reform with spending cuts. Either he used some weird logic to get there, or likely enough he simply misspoke. The spokesman's statement is clear enough. ·
I think Romney's spokesman's statement is the same as his, just constructed better because he wasn't speaking extemporaneously as Romney was.
But you're right, it wasn't "Spending cuts will kill the economy. Period." It was "Spending cuts will kill the economy, if not coupled with my tax plan." And I think I acknowledged that in the post itself.
Jan '11
Re: Romney: Spending Cuts Will Kill the Economy
We know what must be done.
We know it will be painful.
We know the longer we wait the worse it will be.
Apr '11
Re: Romney: Spending Cuts Will Kill the Economy
Percival
I meant that he managed to make himself sound like a Keynesian. Having a steady hand on the wheel will help the economy, even if there is a short-term impact due to spending cuts. Not blowing major cash on Solyndra and other unproductive boondoggles won't by themselves restart the economy, but we are running out of time to get the debt under control. Ryan's plan is pretty gradual in terms of adjustments to entitlement spending, which is where all the real money is anyway. ·
Agreeing with Keynes about things that all economists agree about, from Mises to Mankiw, is no shame. Ask Mitt what the square root of 4 is and he'll give you the same answer as Keynes, too (and probably Hitler!). Obviously the Ryan and Romney cuts are necessary, and crafted to limit and mitigate the harm where possible, but there's no sense in denying the costs of the heroic task ahead.
Re: Romney: Spending Cuts Will Kill the Economy
Palaeologus:But is the underlying assumption here that spending cuts on their own would slow down the economic recovery a correct one? If Krugman, Obama, and Romney are correct on this, then Paul Ryan and his emphasis on spending cuts have been folly.
Or it means that spending cuts alone are insufficient. · 59 minutes ago
If the Republican Congress had an opportunity in the future to secure significant spending cuts without tax reform, or nothing at all, which would be the more preferable option?
Of course, the more likely option in the event of a second Obama term is that a Republican Congress could secure some spending reductions if they compromise on what the tax reform looks like (and surely it would be something atrocious like higher taxes on "the rich" and on businesses).
Nov '11
Re: Romney: Spending Cuts Will Kill the Economy
Diane Ellis, Ed.
I think Romney's spokesman's statement is the same as his, just constructed better because he wasn't speaking extemporaneously as Romney was.
But you're right, it wasn't "Spending cuts will kill the economy. Period." It was "Spending cuts will kill the economy, if not coupled with my tax plan." And I think I acknowledged that in the post itself. · 10 minutes ago
I don't mean to imply you misrepresented him -- you didn't. Just that what he said was a little unclear (obviously the wording wasn't thought through), and he might have misrepresented himself.
The spokesman didn't repeat the line that cutting spending will slow down the economy (he said it would be "insufficient" without "pro-growth policies"), which leaves open the possibility that Romney never intended it that way -- words come out wrong.
Edited on February 22, 2012 at 4:34amNov '11
Re: Romney: Spending Cuts Will Kill the Economy
Diane Ellis, Ed.
If the Republican Congress had an opportunity in the future to secure significant spending cuts without tax reform, or nothing at all, which would be the more preferable option?
I saw Paul Ryan asked once (one of those "this or that" questions) whether he'd take tax reform or entitlement reform.
He said entitlement reform.
(But in the follow-up he said he hesitated -- because we need both.)
Re: Romney: Spending Cuts Will Kill the Economy
James Of England: Like tax cuts, which put money in people's pockets, government spending puts money in people's pockets. Each of these measures means that by borrowing a dollar, you can get more than a dollar's worth of activity. People on the right talk about this as dynamic rather than static accounting for taxes, and rarely talk about the same thing for spending, but essentially all economists recognize the general truth. The fights are about the size of the multipliers, where we are on the Laffer curve, etc, and questions of specific details where the multipliers have odd effects, not really about their existence.
There is simply no way to cut the deficit without taking a hit to the economy. There is simply no way to continue to borrow like this without demolishing the economy.
The point that fiscal conservatives often assert is that government spending crowds out private investment. Which is why you'll hear calls for simultaneous spending cuts and tax cuts.
But when unemployment is high, I believe there's less risk for government spending to crowd out private investment spending. I'm uncertain about this...would love clarification.
Mar '11
Re: Romney: Spending Cuts Will Kill the Economy
Mitt has been running for President for at least six years now. It is well past time for him to say what he means. I understand that extemporaneous speaking is hard, but having a spokesman come out and do damage control on a regular basis is getting old.
If this is Mitt's "A" game, then Drew's characterization is spot on.
Re: Romney: Spending Cuts Will Kill the Economy
Leigh
Diane Ellis, Ed.
If the Republican Congress had an opportunity in the future to secure significant spending cuts without tax reform, or nothing at all, which would be the more preferable option?
I saw Paul Ryan asked once (one of those "this or that" questions) whether he'd take tax reform or entitlement reform.
He said entitlement reform.
(But in the follow-up he said he hesitated -- because we need both.) · 2 minutes ago
We do need both, and Ryan is right to pursue both. But so long as the government is split, the Republicans have to set up a system of triage so that they can expend their political capital wisely.
Nov '11
Re: Romney: Spending Cuts Will Kill the Economy
Diane Ellis, Ed.
Leigh
I saw Paul Ryan asked once (one of those "this or that" questions) whether he'd take tax reform or entitlement reform.
He said entitlement reform.
(But in the follow-up he said he hesitated -- because we need both.) · 2 minutes ago
We do need both, and Ryan is right to pursue both. But so long as the government is split, the Republicans have to set up a system of triage so that they can expend their political capital wisely. · 0 minutes ago
My priority would be Medicare (as I think Ryan's is).
Edit -- rereading your point. If cuts alone slow down the economy, is Ryan a fool for prioritizing them over tax reform, according Romney's logic here? Not necessarily, because it might be a necessary sacrifice to keep from going off the cliff altogether.
But the reform that is Ryan's main focus doesn't actually take effect for a few years yet, so it might not even apply.
Edited on February 22, 2012 at 5:06amDec '10
Re: Romney: Spending Cuts Will Kill the Economy
The problem is that we've been using government "stimulus" for so long and in such massive doses that it doesn't work the way classical macroeconomic theory predicts: each dollar of marginal government spending isn't resulting in a multiple of dollars of economic activity. Look at ARRA and you can see that $800 billion of spending went largely to non-stimulative transfers to other government entities like states. Romney is right from the classic point of view, but I don't think we are operating in that range anymore: we are well into the range of diminishing returns, where cutting spending will make the economy healthier by reducing market distortions and changing the expectations of crash-driven austerity in the near future. In this case, if he wants to combine spending cuts with tax relief, that's wonderful; but he should realize that if the tax relief isn't forthcoming, spending cuts are still necessary.
Apr '11
Re: Romney: Spending Cuts Will Kill the Economy
Diane Ellis, Ed.
The point that fiscal conservatives often assert is that government spending crowds out private investment. Which is why you'll hear calls for simultaneous spending cuts and tax cuts.
But when unemployment is high, I believe there's less risk for government spending to crowd out private investment spending. I'm uncertain about this...would love clarification. · 20 minutes ago
New government spending is also much more likely to have harmful impacts on private sector spending than stuff that already exists. Cuts to long standing programs that have already crowded out the private sector, whose employees are already heavily specialized, aren't nearly as easy as cuts to programs not yet in place or recently implemented.
Sep '10
Re: Romney: Spending Cuts Will Kill the Economy
Romney is favor of more borrowing. That's what "no cuts" really means. Either that or he really thinks that we need more preposterously wasteful blowing of tax dollars, in which case he's a complete idiot.
Sep '10
Re: Romney: Spending Cuts Will Kill the Economy
Romney isn't right from any point of view. Seriously, Stuart, go check out the processes required to let a contract from any branch of the government and then go ask your local restaurant how long it takes them to do the same for their suppliers.
May '10
Re: Romney: Spending Cuts Will Kill the Economy
I see no evidence that there's daylight between Romney and Ryan. Both seek to alter the trajectory of the budget, over time, to avoid harsh, Greece-style austerity (Greece's Catch 22 is that their cuts are now necessarily so severe and disruptive that gdp growth is hopeless). Also, note that Ryan's most recent Medicare reform proposal -- the heart of his longterm budget fix -- is modeled on Romney's proposal. They're singing from the same hymnal, as Ryan says, and Romney had a hand in the composing.
Dec '10
Re: Romney: Spending Cuts Will Kill the Economy
FIFY
I'm no economist, but it just seems common sense to me that government is a consumer of capital, not a producer. This makes me highly skeptical of the "multiplier effect." Wealth is created in the private sector. The (mis)allocation of capital to/through government is choking the ability of the private sector to create wealth. Government doesn't create jack... and liberals don't care, because their power comes from growing government, not wealth.
So, under the Romney plan, all those GIs soon to be unemployed due to Republicans accommodating liberals again(!) will be dressed as Lady Liberty and holding "Tax Returns HERE" signs while dancing a jig by the roadside.
Dec '10
Re: Romney: Spending Cuts Will Kill the Economy
And the Tea Party is dissed again.
Drew called it.
May '10
Re: Romney: Spending Cuts Will Kill the Economy
Re taxes: Romney has frequently praised the pro-growth tax reforms proposed by the Debt Commission, as has Ryan. It's long been my suspicion that Romney has been cautious on tax reform because he understands that it's an argument already won: today, right now, a bi-partisan consensus could be forged on center-right tax reform and signed into law next week. There was simply no point in giving a specific plan that Obama could distort and demagogue. Yet now with his struggles in the primary, Romney's concluded he has no choice but to offer specifics.
Nov '11
Re: Romney: Spending Cuts Will Kill the Economy
Romney-Ryan 2012!
(Probably not. Would be fun, though.)
Jan '11
Re: Romney: Spending Cuts Will Kill the Economy
Krugman's premise is that the public sector has to supply the spending, during tough times, when the private sector can't supply it for itself. Government spending was supposed to be a crutch to bridge the economy through difficult times.
When it comes to the point, however, that the crutch is preventing the patient from walking again ...you just have to cut.
If we had confidence that the private sector would get back on its feet and resume commercial spending, then using government to bridge the gap for short periods wouldn't be so bad. But when the spending becomes a permanent expense, especially with the demographic explosion in entitlements, it prevents the private sector from spending at healthy levels.
The short-term fix postpones the long term resolution. Krugman's agenda will cement the short-term fix instead of holding out hope for the traditional long term recovery.