What’s Wrong with Romney? — 24 September

I remember John Kerry, at the height of the 2004 election, and with George W. Bush stubbornly holding his place in the polls, muttered, “I can’t believe I’m losing to this clown!” I sometimes wonder if Mitt Romney feels something similar.

After all, it defies logic that anyone presiding over the dismal economy we have now could have a prayer of being re-elected.  How can it be that the headline polls actually have him ahead in the campaign?

The case against him as a steward of the economy need hardly be rehearsed.  But here are a few data points that have escaped broad attention.  We all know that we have suffered from unemployment of 8% or more for forty-plus months now.  But what may not be so widely known is that the labor force participation rate is the lowest it’s been in 30 years.   If the millions who have dropped out of the workforce were actually still trying to find work and counted in the statistics, our unemployment rate would be upwards of 10.5%.  Workforce participation among men is the lowest it’s ever been.  Ever.

We all know, too, about the massive debt that President Obama has created for us.  What is less appreciated is that the only reason this debt is manageable is that the Federal Reserve is giving the Obama Administration a twofer: On the one hand, it is keeping interest rates ultra-low, so the cost of being so deeply in hock is minimized.  It’s easy to rack up big debt when rates are at rock bottom – ask all those who were snookered by teaser-rate ARM’s.  When rates go up, as they inevitably will do, the cost of carrying that debt will skyrocket.

The second gift from the Fed is that, with their Quantitative Easing programs, the Fed is actually buying most of the debt our government issues.  The government pays interest to the Fed – which turns around and gives its income back to the Treasury.  One day, when the Fed has to sell off all that debt to the outside world, the government will actually have to pay for its debt – at a time when rates are going up.  That too, will make the debt cost more realistic, meaning crushingly high.

A third point that was not widely noted: in the Fraser Institute’s Economic Freedom of the World report – which measures countries’ relative policy impact on economic growth – the US this year fell to 18th place, having occupied the No. 2 slot as recently as 2000.  It dropped ten places just this year.  This is attributed to the gamut of Obama policies, from big government to the undermining of property rights, from crony capitalism to out-of-control entitlements to burdensome regulation.  Need I point out that a declining rank is not indicative of economic strength? 

With this record of failure as a backdrop, how is it possible that Mitt Romney is not 6-8% ahead of the President in all the polls?

The god of politics has a sense of humor, there’s no question about that.  How else to explain the fact that, with Obama’s message essentially being the Robin Hood ethic – take from the rich to give to the poor – the Republicans end up selecting from all their candidates a man perfectly cast to be the villain in that mythology?  Romney is not just rich, he’s filthy rich.  And Obama and his allies find it easy to play on class resentment and the Occupy Wall Street motif.  Just by being who he is, Romney underscores their narrative.

Also, the Republicans made a strategic error over the last several years that is now coming back to haunt them: they allowed the liberal interpretation of the causes of the financial crisis to become the commonly accepted wisdom.  That interpretation said that it was lax regulation and greed on Wall Street that lay behind the crash – in a word, the policies of the Bush Administration.  Indeed, that was the McCain/Palin explanation back in 2008, as well.  I have argued extensively that the real nexus was Fannie and Freddie and the Congressional campaign to extend subprime borrowing downmarket so more and more marginal credits could “afford” houses; this, coupled with the Greenspan Fed’s free money (interest rates were below the rate of inflation) led to the bubble, and all the rest were camp followers.

But by not making an alternative case, conservatives have abandoned that field to the Democrats, who now use it to bludgeon the Romney/Ryan ideas to right the mess we’re in, and we have no answers.  Not to mention the fact that the misdiagnosis has led to bad policy responses like Dodd-Frank, the Volcker Rule, and the Consumer Financial Protection Agency, all of which contribute to the regulatory straightjacket that has pushed us down to Number 18.

It certainly helps Obama’s cause that he has an advocacy press.  The hypocrisy and bias of the mainstream press has been widely noted; I merely point out two recent data points.  First, Bob Woodward’s recent book, Price of Politics, recounts how it was Obama in August of 2011 who scotched the Grand Bargain being negotiated with John Boehner to resolve the spending/debt issue.  Boehner had defied the Tea Party and agreed to increase revenue via tax reform – as recommended by the Simpson-Bowles Commission – but the President poisoned the deal, insisting on higher tax rates for the wealthy.  This got no mention at all in mainstream accounts.  In my favorite thought experiment – imagine if it had been Bush who had reneged on a deal on an existential issue for the country.  I need hardly say more.

The second point concerns the lascivious attention the press paid to Romney’s supposed gaffe about the mealy-mouthed apology our Egyptian embassy issued about the inflammatory video that supposedly was sparking anger and protests.  Romney was on point – any expression of sympathy must be accompanied by a ringing endorsement of our freedoms.  But it was supposedly a gaffe; meanwhile on the day the news broke that our Ambassador to Libya had been killed in Benghazi, our President (who has missed about half of his daily security briefings) jetted off to a fund-raiser in Las Vegas, with barely an eyebrow raised.

Regardless of these headwinds, however, Romney can blame no one but himself for the current state of the race.  This election is one that will likely determine the course of the country for generations – either toward an unaffordable entitlement state with heavy government control, or toward a rejuvenation of the American entrepreneurial spirit guided by a light government hand.  Romney’s selection of Paul Ryan as running mate seemed to indicate he appreciated the importance of the big issues.  Since then, however, the case has not been made.

Romney should be killing Obama.  If he provided a compelling vision of where the country would go under his leadership, it would tap into the hearts of millions who have grown tired of Obama’s feckless management of the economy.  The country is waiting for a reason to jump on the Romney bandwagon, and he has that reason right in front of him.

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