Ten Miles Square


February 24, 2012 11:36 AM No Bailouts for Romney’s Intellectual Bankruptcy

By Jonathan Alter

By all accounts, Mitt Romney is a smart businessman with a sophisticated understanding of how economies work. So why is he so tied up in knots over basic questions of government spending in a recession and the limits of the free market?

Because he’s running for president in a party that has lost its economic common sense, its political bearings and probably Michigan’s electoral votes.

Here’s the Republican candidate off-script (the best way to find out what’s in his head) at a town hall meeting Tuesday in Shelby Township, Michigan: “If you just cut, if all you’re thinking about doing is cutting spending, why, as you cut spending you’ll slow down the economy, so you have to at the same time create pro-growth tax policies.”

This is a classic example of a “Kinsley gaffe” (named for my Bloomberg View colleague Michael Kinsley), which is when a politician accidentally says something that’s true but politically inconvenient.

Sure enough, Andy Roth, vice president for government affairs at the fiscally conservative Club for Growth, called Romney’s comments “hogwash.” Roth said the statement “confirms yet again that Romney is not a limited government conservative. The idea that balancing the budget would not help the economy is crazy. If we balanced the budget tomorrow on spending cuts alone, it would be fantastic for the economy.”

Ask a Professor

Oh, really? If we balanced the budget by immediately cutting $1.3 trillion in spending, as some Tea Party adherents advocate, unemployment would surge. Spending cuts (mostly through entitlement reform) are critical in the medium and long term, but they’re harmful when the economy is weak. If you don’t believe Romney or me on this point, ask any economics professor who isn’t a crackpot.

After Romney’s gaffe, a campaign spokesman undertook damage control with a tortured statement that amounted to saying that Romney supports the House Republican “Cut and Grow” economic policy. This is the one that shuns all “investment” as a Democratic codeword for spending (thereby repudiating 150 years of Republican support for infrastructure investments) and says that the route to economic growth is through tax cuts.

A preview of Romney’s tax plan making its debut Friday in a speech in Detroit suggests that “Romneynomics” would in effect transfer wealth from the poor and the future old (through draconian cuts in Medicaid and Medicare) to the wealthy (through more tax cuts at the upper end). You may recall that President George W. Bush tried a variant of this with his 2001 tax cuts and the result was the weakest decade of job growth since the 1930s.

Romney is trapped in a “theology” (to use Rick Santorum’s word in a different context) that he knows is completely inadequate for addressing our economic problems.

We first glimpsed that trap during the 2008-09 economic crisis. Like many in his party, Romney supported the Troubled Asset Relief Program for banks but opposed the portion of TARP devoted to the auto industry. He was sure the auto bailouts would fail and thus he was safe in writing his now famous “Let Detroit Go Bankrupt” op-ed article in the New York Times.

In fairness to Romney, that piece was written in November 2008, when clueless automakers were asking for money from the outgoing Bush administration with no strings attached. (They got $17.4 billion and flushed it down the same old rat holes.) Romney wrote that government guarantees for warranties and post- bankruptcy financing would be acceptable and these eventually became part of the Obama deal.

Intellectually Bankrupt

Even so, the premise of that piece, which endorsed a “managed bankruptcy” without direct federal money, was itself intellectually bankrupt. It assumed that the car companies would find new investors after reorganization. But the firm Romney co- founded, Bain Capital LLC, was among many potential creditors that refused to touch any deal involving auto companies. The billions necessary to keep General Motors Co. (GM) and Chrysler alive weren’t available from any place but the government. When CNN moderator John King made this point during Wednesday’s debate among Republican candidates, Romney tried to ignore it.

Romney’s approach was popular among many Republicans, who hypocritically argued that the rules of free market capitalism could be suspended to bail out bankers but not workers. Sure, hundreds of thousands of people working for auto companies or their suppliers would lose their jobs, but that was just part of capitalism’s “creative destruction.”

This selective approach to conservative principles — not Romney’s opposition to the auto bailouts — is what put Romney in trouble with primary voters in Michigan, where Santorum’s consistency in opposing all bailouts has won him conservative support.

Santorum tried to use that consistency to his advantage in Wednesday’s debate. Like so much else about his performance, he failed. Could it be that free market fundamentalists have been consistently wrong for three years? They are the “little minds” Ralph Waldo Emerson had in mind when he savaged the “hobgoblin” of “foolish consistency.”

Every so often, history renders a clear verdict. However noxious and debatable the particulars, the TARP bank bailouts averted a global run on American banks and a depression. They helped to stabilize the global economy. Almost all of the money has been paid back.

The auto bailouts? The reduction in Michigan’s unemployment rate from 14.1 percent in 2009 to 9.3 percent today isn’t a matter of opinion or differing economic philosophy. It’s a happy reality that should make any open-minded conservative acknowledge that dogmatic adherence to abstract principles usually ends badly.

Romney’s core problem is that he doesn’t have the courage of his pragmatic impulses. If he did, he’d stick with his view that cutting spending sharply in the short term is a bad idea, and that in extremely rare circumstances we must hold our noses, put principles aside and let Washington prop up vital industries.

Of course he can’t say that, which means that winning Michigan is all but out of reach for him or any other Republican candidate this fall.

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Jonathan Alter a contributing editor of the Washington Monthly, is the author of one book on Franklin D. Roosevelt and two on Barack Obama.


  • rbe1 on February 25, 2012 1:55 AM:

    It's because he's speaking to dumb people.

  • June on February 26, 2012 9:45 PM:

    Good piece - it can't be driven home enough that Romney's solution to the auto industry crisis was based on magical thinking, not realistic strategies.

  • Dan C. on February 28, 2012 6:22 PM:

    While I am completely embarrassed for America by the ship of fools that is the GOP candidate pool, I am far more embarrassed by what the Republican Party is doing to our country.

    Republicans have adopted a publicly stated charter of doing anything and everything possible to undermine our Commander-In-Chief. This by the way has replaced their appointed charter of upholding the constitution to serve the interests of the American people by governing.

    The current Republican Party charter is designed to do one thing … serve the personal, self-interests of its members. While they play politics to achieve their personal goals, it is abundantly obvious that this is being done at the expense of the American people.

    Lets have a look at just three of the ignoramuses marching in the circus parade that they created:

    1) A ruthless predatory corporate raider who, with a straight face will lie to you and say he is all about creating jobs, while the fact of the matter is; the business world experience he brags about was focused entirely on making a personal fortune by systematically pulling the jobs out from under thousands of hard working American men and women. (Check it out at www.KingOfBain.Com) and this supposedly concerned American was boldly and proudly in favor of letting the American Automobile industry to belly up to the tune of hundreds of thousands of US jobs.

    2) A paranoid, nut-job, ultra conservative, who openly advocates, a womans place is in the home and he undermines years of progress by preaching to our youth that contracting AIDS or other STDs is a far better alternative to using a condom. This tool actually goes so far as to warn us about what he believes is a plot by our President to use our institutions of higher education as tools to mold us all in his image. This is absolute CRAZY TALK!

    3) Then we have the chronically insecure and morally deficient poster-child of infidelity, and government corruption who not only pioneered the government shut down tactic as a self-serving extension of his personal temper-tantrum but he pioneered new ways to profit illegally from government working with agencies. He was forced to pay back the 1.5 million he illegally pilfered from Freddie Mac while serving as a consultant

    It doesnt matter what individual is in the race for the GOP nomination, because there is not a person alive who can conceal or otherwise disguise the self-serving and morally bankrupt ideology that has become the single-minded driving force behind the Republican Party.

  • Jamie on February 29, 2012 5:05 PM:

    both intellectually and Morally bankrupt. a perfect leader for the twenty first century GOP

  • Mick on March 01, 2012 10:37 AM:

    Well said Dan.
    The demagogues that have been running the country for the past 20 years have done a great job bankrupting the country while ensuring the wealthy keep their money and corporations are bailed out with ours. The bill of rights are being slowly stripped from us and congress doesn't seem to know what its job actually is.

    Time to get back to basics...The Constitution. Period.

    And the one candidate who stands for all that made America great is completely ignored by the corporate media...

    Ron Paul.

    The establishment and even his own party is afraid of what he represents. Using the constitution as it was designed....a tool to limit government and protect our Liberty.

  • SSH on March 06, 2012 12:34 PM:

    @Mick: Ron Paul is just as bad. He wants to take us back to the 1870s "States Rights" era of raw bigotry, but uses code words like liberty, limited government etc. His dissembling on the Newsletter fiasco was disgusting. While in congress he also happily used earmarks for his district while nominally opposing it knowing fully well that the bill would pass. Talk of hypocrisy. He tells you things you want to hear and which many of us support (like his anti war stance). That cant be the only yardstick, as David Duke is anti-war too. He freely addresses paranoid extremist groups like the John Birch Society and I am supposed to believe that he will fight for liberty? The well off will get more liberty to oppress, but the rest of us will get shafted even more. This does not even pass the smell test. And he has the typical GOP anti science view to boot.
    (Please dont take this the wrong way as this is a criticism of Ron Paul and his dark side which people need to know. I supported him initially until a deeper look revealed an ugly underside.