After South Carolina — 23 January 2012

Well, hush my mouth.

I confess, I was doubly wrong back in October, when I said Mitt Romney was the inevitable GOP choice.   First, of course, wrong in that Romney is far from a shoo-in, and secondly when I said at the time there was no need for more debates; in fact, the debates are what have changed things so dramatically.

Here is why Newt Gingrich won in South Carolina: his debate answers to Juan Williams about jobs and food stamps, and his response to John King about Marianne Gingrich’s interview.  They were boffo performances, and won him standing ovations.  Here, at last, you can hear the ABM (anybody but Mitt) crowd sigh, here is our Paladin, our hero, someone we can get excited about.

In contrast, Romney’s performances have been woeful.  He has been unsteady, stuttering, evasive, and above all, he has failed to stand up against charges brought by his opponents about his business practices at Bain and his personal taxes.  I thought this campaign was going to set up a classic match between Obama the redistributionist and Romney the unapologetic capitalist.  Indeed, his recent book (why is it that all presidential aspirants must nowadays have a book out at the same time?) was titled No Apology, and while that was meant more to contrast with Obama’s repeated Apology Tours around the globe, the title should serve as well for Romney’s stance on the critical issue in this election.

America is on the cusp of either an accelerated slide toward European-style economic sclerosis, or a rediscovery of our principles and a renewal of robust growth and optimism.  The winner of the November election will do much to determine which way we go.  Romney is  best positioned to be the one to make the case for the free market, given that he has proven to be so adept at it.  But, like so many GOP spokespeople, he stops short of full-throated enthusiasm.  Why is it that we concede the rhetorical high ground to liberals when it comes to the great question of our political economy: whether ’tis better to have equality or freedom?

When his Republican rivals attacked Romney for his “vulture capitalism,” he should have come roaring out with chapter and verse about the tens of thousands of jobs created at Bain companies, about the gains made by pension plans investing in Bain venture capital pools (which help pay retired workers their deserved benefits), about how companies that do what Bain does are the hammer of Schumpeter’s “creative destruction.”

Moreover, he should have made the moral case for free markets: that they enable people to exercise their individual autonomy without being subjected to some sort of coercion by authority.  The degree to which the state makes economic decisions is the degree to which ordinary people have ceded their freedom of action in the economic arena.  And regardless of the existence of elections, the permanence of the bureaucracy and its steady accretion of power are proof that the pendulum does not swing freely both ways.

By contrast, the goal of equality inevitably involves holding one party back so that another can advance.   It unjustly deprives the striver of his due earnings; it therefore undermines his incentives to continue to work hard, leading to lower growth in the economy at large; meanwhile, the beneficiary learns to be dependent, and loses whatever incentive he might have had to strive for a better situation.  There are so many things wrong with that principle, I am astounded that it even gets air play.  And yet, the soon-to-be President of the United States told Joe the Plumber that “When you spread the wealth around, it’s good for everybody.”

Romney showed a similar timidity on the issue of his taxes.  First of all, shame on him and his staff for failing to see that one coming.  The tax returns should have been posted online preemptively.  Beyond that, though, he should have defended the low rates for investment income – it is not like wage income, which one’s employer assures for as long as there is cash flow.  Investment income is highly variable – when the stock market is down, investment returns dry up (one reason why states that levy high taxes on millionaires find themselves with unexpected revenue gaps during hard times).  Also, investment returns are delayed – the payoff for a venture capitalist may not be realized for years after the commitment of money (and assumption of risk that the money may not be repaid).  Not only is there a time value of money argument, but inflation eats away at the purchasing power of the returns when they are ultimately paid.  Taxing them at regular income rates would make investing unprofitable, and lead to a depressed economy.

This has been universally recognized for decades, which is why these differential tax rates have existed for so long.  Romney should have been out front on this issue, marking a sharp contrast between his understanding of real economics and Obama’s share-the-wealth illusions.

But chest-thumping oratory is not Romney’s style, and it has hurt him.  He has been content with the pitch that his resume is his chief qualification for the top job.  And while at some level, he is right – he has clearly shown the ability to bring positive change to difficult, even hopeless situations (such as the Salt Lake City Olympics) – that is not enough for millions of voters out there this year.  This is an election of big issues.  Romney is running as a technocrat.

On the other hand, we now have Newt rising.  The Republican establishment is not happy about this, but the White House is.  Gingrich is brilliant, and he could probably wipe the debate floor with Obama, who has shown in the last few years a tendency to get testy and surly when he is put on the spot.

But the ovations cited above that have propelled Newt thus far have been expressions of anger – at political correctness, at the liberal press.  Anger may win primaries in this country; it does not win elections.  Beyond that, Newt tends to fall victim to his own brilliance.  He swerves; he improvises; he goes off-message.  Frankly, I think he would make an erratic candidate and a terrible president.  I don’t see him inspiring, in the encouraging, optimistic Reagan mode, and I certainly don’t see him effectively managing either the huge Federal bureaucracy or the complex of relations with Congress.  Indeed, I’ll be willing to bet he has as many burnt bridges on the Hill as he has supporters.

So Republican voters have a choice.  They can opt for the stolid Eagle Scout, who can be counted on to manage well the engines of state but will not excite a mass following; or they can choose the Roman candle – exciting to watch, but unpredictable, and apt to blow up at any moment.  Romney would make his case much stronger if he showed he was capable of a little fireworks as well.

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