The general election’s political calculations

By Lawrence Summers
April 26, 2012

Arithmetic done under the constraints of politics is always suspect, and one should always examine carefully the claims of those seeking votes. But smart observers have learned to distinguish between the claims of political candidates and their advisers on the one hand, and proposals that have been evaluated by independent scorekeepers like the Congressional Budget Office on the other.

This principle has never been better illustrated than by the “budget analysis” put forward by Governor Romney’s chief economic adviser, Glenn Hubbard, in a recent Wall Street Journal column. Hubbard constructs a budget plan he imagines that President Obama might propose someday, engages in a set of his own extrapolations and then makes a set of assertions about it. He does not discuss President Obama’s actual plan or how it has been evaluated by the CBO. Nor does he invest his credibility in defending the claims that Governor Romney has made regarding his own fiscal plans – he simply states that, “Yes, President Obama and Mitt Romney have budgets with competing visions. But Governor Romney’s budget makes tough choices…” without delving into the specifics or trade-offs that Romney’s “tough choices” entail.

President Obama put forward a plan earlier this year that would reduce deficits by more than $4 trillion over the next decade. It would bring discretionary spending to its lowest levels since the 1960s. It includes $2.50 in spending cuts for every $1 in additional revenue. It also asks everyone to pay their fair share of taxes, repealing the Bush tax cuts for families making more than $250,000, and closing loopholes and shelters like preferences for private jets, hedge fund managers and offshore investments.

The independent Congressional Budget Office confirms that it would stabilize the debt as a share of the economy – thus returning us to a tenable fiscal path. It would do that while allowing increased investments in education, research and infrastructure that are critical to stronger, shared economic growth in the years to come. By focusing on building a strong economy for the future, it expands the tax base and reduces pressures for future tax increases.

But rather than criticize this approach, Hubbard ignores it – and instead chooses to invent a set of assumptions that bear no relationship to the president’s actual policies. His figures are not explained, but they apparently arbitrarily assume that the president must raise taxes to pay for spending above a level of Hubbard’s choosing.

Rather than filling imaginary gaps in the president’s budget, which has been spelled out in sufficient detail to permit evaluation by independent experts, Professor Hubbard should perhaps fill in some of the many gaps in Romney’s plans.

Start with his tax plan. The Romney campaign has been very clear about what he is promising: $5 trillion in tax cuts on top of extending the Bush tax cuts, with those benefits heavily weighted toward the country’s wealthiest taxpayers. Romney claims to pay for this plan by ending tax shelters, principally for the wealthy, but he hasn’t specified a single tax break that he would close. Romney himself has acknowledged the lack of details in his plan, stating in reference to his tax plan that “frankly, it can’t be scored.” I have been party for many years to searches for “high-income tax shelters” than can feasibly be closed. I know of no reputable expert in either political party who would find that there is anything even approaching $5 trillion in potential revenue to be generated from this source.

Romney has also proposed a massive defense buildup, even while he says he will cut spending deeply enough to balance the budget. I think it’s clear why he won’t tell voters which cuts he would make: because in the past, disclosing his planned budget cuts was politically damaging.

We have seen this movie before. When President Clinton left the White House, our country was paying down its debt on a substantial scale. I was privileged as secretary of the treasury to be buying back federal debt. President George W. Bush campaigned on a program of tax cuts supported by economic advisers not subject to the rigors of official budget scorekeeping. The results – trillions of dollars of budget deficits – speak for themselves.

This is a very consequential election. As we continue to recover from the largest economic crisis in generations, we face a continuing need to strengthen the job market, address large fiscal challenges and build an economy that is based on sustainable, shared economic growth. Voters should have a chance to choose between clear alternatives. President Obama – consistent with his obligations as president – has laid out a multiyear budget embodying his vision for the future, and it has been evaluated by independent experts. It is time for Romney to do the same.

11 comments

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It’s too bad that a lack of correct information isn’t handled in the same way as providing false information is (in a court of law). As it stands, those with the most power are held to a lower standard than normal citizens, i.e., they don’t need an actual plan, just appear to. If a McDonald’s manager behaved this way, we would receive empty containers instead of food, and get a raise for it.

Posted by boon2247 | Report as abusive

The Romney campaign has made it clear that this election will not be Romney vs. Obama. Romney is running against a candidate of his own creation.

The candidate Romney is running against is a reckless, socialist tyrant who…well…he’s just not one of us (wink-wink.) Romney’s opponent runs around the world spending taxpayer money on lavish trips while apologizing to everyone for America. Romney’s opponent thinks America’s best days are behind us, intent on turning our country into a welfare state while eviscerating our military. Romney’s opponent wants to punish people who work hard and are successful through wealth redistribution (psst…reparations) and onerous tax burdens that will destroy job creation. Romney’s opponent is an appeaser whose only foreign policy tactic is talking while our enemies are plotting attacks against our people. He tries to take credit for killing Osama bin Laden when it was really Navy SEALS who had nothing to do with Romney’s opponent. Romney’s opponent is engaging in a war against religion and doesn’t respect our Constitution. And Romney’s opponent would like to see everyone go to college–what a snob! Oops, I believe that was Santorum’s opponent. Sorry. Scratch that. He’s possessed by his radical socialist father’s Kenyan spirit. Dang! That one was Newt’s opponent. It’s hard to keep it all straight.

Yes, there’s no way I’d vote for Romney’s opponent. Who would? Besides, we’re not even sure if he was born in the US, if he’s a Christian, or if he’s been vaccinated for Small Pox. Problem is, neither would I vote for a candidate who is so diffident about his own character, his own leadership abilities, and his own policy proposals–what little there are–that he and his campaign team feel the need to run their campaign against an opponent they’ve created, a boogie man that doesn’t exist, instead of the real opponent, the current President of the United States.

Romney is denying us an honest election where two candidates debate the issues so that Americans have a clear idea what direction they are voting to take this country in. Instead we’re given another silly reality show and at the end we cast our votes, and if Romney wins, I guess we’d find out what he really has planned for this country over the next 4 years. Trickle-down economics? Yeah, that’s worked out real good for us.

Obama has proven himself to be remarkably adroit under incredibly adverse circumstances, circumstances that would make most people’s heads explode. My head wants to explode just watching the kind of boorish, relentless opposition that Obama must face everyday by his own countrymen. He’s well-earned another 4 years.

Posted by flashrooster | Report as abusive

Well said!

Posted by leslie20 | Report as abusive

I’m I the only one that hates Lawrence Summers for his part in destroying America?

Oh and by the way…the Social Network was a stupid movie and Facebook is retarded. I can’t stand that too.

Posted by Lord_Foxdrake | Report as abusive

I struggle with this statement: “It also asks everyone to pay their fair share of taxes, repealing the Bush tax cuts for families making more than $250,000, and closing loopholes and shelters like preferences for private jets, hedge fund managers and offshore investments.” What is a fair share and how can such a politically pregnant phrase continue to be a rallying cry without a distinct definition. If you fall into the category of making just over $250,000 your tax burden is exponential compared the majority of the population. So define “fair share” and “middle class”, as in not raising taxes on the middle class, so we have a basis of understanding.

Posted by tsdudley | Report as abusive

Mr Summers provided a link above to a CBO analysis of the President’s proposals. This is a quote from that report, and is in reference to comparing the effects of the President’s proposals versus the CBO “baseline” projections under current law:

“For the 2013–2017 period, before accounting for the
macroeconomic effects, CBO estimates that the President’s
proposals would add a total of $1.5 trillion to
deficits, resulting in a cumulative deficit of $3.2 trillion over that period (see Table 1). The economic
feedback from the President’s proposals would yield
projected deficits totaling between $3.0 trillion and
$3.2 trillion over that period.”

“For the 2018–2022 period, before accounting for the
macroeconomic effects, CBO estimates that the President’s
proposals would add a total of $2.0 trillion to
deficits, resulting in a cumulative deficit of $3.2 trillion over that period. The economic feedback from
the President’s proposals would yield projected deficits
totaling between $3.3 trillion and $3.6 trillion over
that period.”

Posted by FlBob | Report as abusive

I read this already in the Washington Post. Prof Summers’ secretary must be working overtime. Hubbard is indeed something of an idiot. And I think a monetarist. I imagine there aren’t $5 trillion in cuts to the ordinary budget, but I think Rep Ryan, whose budget Romney seems to back regardless of Dean Hubbard’s ideas, knows that as well as Larry does.

Posted by REMant | Report as abusive

Thanks for the insightful synopsis of the 2012 Presidential contest, flashrooster!

Posted by TobyONottoby | Report as abusive

Idiots commenting on Idiots. How American !!!
Our elections are meaningless while Wall Street controls all those ‘elected’.
You all go back to your American Idol, Fox News & Oprah Winfrey world, and be content sucking on your thumbs.

Posted by GMavros | Report as abusive

Romney’s tax plan is the Wall Street tax plan. He is a nobody.
Mr. Romney would have never reached the primaries if it wasn’t for the Wall Street Mob that has propped him up.
He is only their puppet gangster & a foot soldier.

Posted by GMavros | Report as abusive

The Paul Ryan budget is the Romney budget. A budget that would put us in the same recession that the UK is going through now. The UK is a map of what the Ryan budget would do to the USA. But Republicans cannot see well, they are so focus on trashing the middle class and making the rich more wealthy.

Romney has NO plans for anything, he continues his attack on Obama, as the Republicans want him defeat in any way they can get it done.
We have had Republicans control the House since 2010 and NOTHING has been accomplished, in fact the House is on vacation 65% of the time. They have one been in session 52 days in 2012. This is nonsense. What are we paying them for? Also the ALEX bills passed and approved by Republican controlled states tell the real picture of the Republican mission.

Posted by xxxmarked | Report as abusive