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An Economic Program that Voters Can Understand

Irwin M. Stelzer

The latest jobs report should persuade all those who worry about the president’s economic policies but find him likable that enough is enough, and that policy trumps personality when it comes to deciding who should occupy the White House. Job creation remains anemic, the unemployment rate has ticked up to 8.3 percent, and the labor force participation rate continues to fall as more and more Americans choose the couch over tramping the streets looking for work. The Labor Department sums it up: Both the number of unemployed and the unemployment rate “have shown little movement thus far in 2012.” It should be clear that it is time for a change.

The president has gambled the nation’s ability to recover from this recession on policies that include high taxes, more regulation, attacks on businesses and “millionaires and billionaires,” stimulus spending that ends up largely in the pockets of members of public service trade unions and campaign contributors, and huge deficits—gambled and lost. Like other obsessive gamblers who cannot recognize failure until they are ruined, he wants to double down—make the same bet again in the hope that this time he will roll prosperity instead of more joblessness. Ideologues, like addicted gamblers, reject experience as a teacher. And when they are gambling with other people’s money, they have little incentive to change, especially if they can count on a winning personality to persuade supporters to overlook the minor matter of oncoming penury.

To get our country back on a growth path we have to change course, which means that Mitt Romney has to win. Which means, in turn, that he will have to do more over the next three months than repeat what voters already know—that the Obama plan for America’s economic future is leading us to European-style stagnation and a level of indebtedness that a no-growth economy will never be able to repay. Romney will have to say what he plans to do if the voters give him the opportunity to redirect national policy. His plans will have to meet two criteria: They must be consistent with the conservative principle that government policy should provide a framework for markets to work, and they must meet some rough standard of fairness, which is much on voters’ minds in this day of increased inequality.

Here are a dozen points Romney might consider making. They are not the Ten Commandments: Dropping some and watering-down others is permitted. So are changes to accommodate the fact that politics is the art of the possible. What is not permitted is a continuation of a campaign that combines a minimum of forward-looking specificity with a maximum of backward-looking attacks, leading to an overall failure to explain what the heck is going on in our economy and how Romney will fix it.

Extend the Bush tax cuts for one year. With partisanship off the boil after the election, and Bill Clinton as an ally, this can be done quickly—if accompanied with a pledge to use this grace year to enact broad tax reform that would root out of the tax code the provisions that benefit the wealthy while retaining their incentive to earn more and create jobs. No more deductions for mortgage interest on second homes; no more special allowances for the oil industry; no more favored tax treatment for venture capitalists and hedge-fund operators. There are more, but you get the idea: The tax code has to be simpler and fairer.

Arrange for mortgage forgiveness that will actually increase what banks will retrieve from the mortgage mess, recognize reality on bank books, increase consumer spending, avoid creating even more underwater properties, and give the housing market a boost. New studies show it can be done. 

Impose a moratorium on new regulations not urgently needed to save lives. That will be the pause that refreshes, and give us a chance to review the tens of thousands of regulations now in effect, cull those that are unnecessarily imposing burdens on businesses and costs on consumers, and see if the remaining regulations need supplementing. That will give businesses some of the certainty that has been sorely lacking, causing companies to sit on huge cash piles rather than subject them to the tender mercies of the Obama regulatory machine.

End crony capitalism. If some industries and research are to be subsidized, the recipients of subsidies should not be selected by the politicians and bureaucrats who brought us Solyndra. Let applicants for available funds bid for them by putting skin in the game—their own money—and whoever bids the most, is willing to take the biggest risk, gets government help. Inequality that results from hard work, superior skill, and invention of a better mousetrap has never offended Americans; inequality that results from Solyndra-style crony capitalism—you fill my campaign coffers and I will channel taxpayer money to your corporate treasury—does. 

Break up the big banks. If a bank is too big to fail, it is too big. If some wild-eyed trader wants to shoot for the card that is so high and wild he’ll never need to deal another, don’t let him put the financial system or depositors’ money at risk. Let him trade and invest the way Paul Volcker wants him to—in situations where he and his counterparts can hurt only themselves, not the overall economy. Even Sandy Weill, who cobbled together Citigroup, now admits he made a mistake, and that it is impossible to manage such a diversified behemoth. 

End the madness that lets bankers totter off with giant bonuses, paid on profits that later turn out not to have existed. Claw back those bonuses. Require future bonuses to be paid in shares not marketable for five years—that won’t end all of the ingenious ways the bankers and their lawyers can find to line their pockets, but it will at least reduce some of the heads-I-win, tails-you-lose decision-making by financial elites.

Make wealth and success respectable again. Reforming the banks should not be allowed to morph into the mindless attacks on business and success that have issued from the Obama administration for almost four years. With corporate governance reformed to make compensation more closely related to performance, there will be no need for successful businessmen to be ashamed of their incomes, or for a president to treat them as some sort of crooks.

Treat small businesses as the valuable wealth and job creators that they are. Exempt startups from all save the most basic health and safety regulations for two years. And from taxes.

Get health care reform right. No need for mandates that are both uneconomic and infringe on personal liberty. But “yes” to a requirement that insurers offer to cover preexisting conditions at premium rates reasonably related to the cost of such coverage. And “yes” to protecting those unable to cover their own costs of coverage, and to requiring those of sufficient means to finance more of their own health care. And “yes” to exemptions for employers and individuals who find provisions concerning abortions in violation of their religious beliefs.

Attack the deficit by combining spending cuts, tax reform, and, if needed, revenue increases that do not stifle incentives to work hard and take risks. That might mean shifting the tax burden from earnings and profits to consumption, taking care not to make such a move regressive. Or taxing wealth instead of income. Do an FDR—gather unconventional thinkers along with your more conventional ones, give them all a real hearing, and then put their ideas through the filter of your long business experience.

Move against trading “partners” who live off sales to Americans but restrict access to their own markets. And those who steal our intellectual property. The message should be, “change your ways or find some other place to peddle your goods.” And if that troubles the World Trade Organization and free trade theorists, so be it. There is a difference between a lurch to protectionism and retaliation, the latter suggested by none other than Adam Smith as a way to bring unfair traders to heel. 

Save entitlements. Make sure that everyone over a certain age keeps his and her entitlements, and reform the programs so that they will avoid the bankruptcy to which they are doomed under current Obama policies.

There you have it. Simple enough for government work. And a program that voters can understand.

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