Mitt Romney announced yesterday that he has decided not to run for President again. The news was unsurprising, given his age and his wife’s health problems, but also a little sad. I have been consistent in my view that Governor Romney is a decent and competent man, who may well, in a different time, have turned out to be a rather good President. I didn’t vote for him, and don’t regret it, but I respect and admire him personally; just disagreed on matters of policy.
But of course, inevitably, his announcement led to exactly that sort of speculation; what if he’d won, how would he have governed, how would history (hypothetically) have assessed his hypothetical presidency? I think, in fact, that his election in either 2008 or 2012 would have proved disastrous to our nation. But in a different time, he could have turned out quite well. Let me explain.
Mitt Romney’s appeal to voters was resumé-based. He was a successful business manager, who knew how to turn failing companies (and by implication, a failing national economy) around. The problem is that in 2009, on the heels of the world wide financial crisis, we didn’t need a businessman in the White House. We needed a macro-economist. President Obama isn’t one, and he wasn’t terribly well advised by his economic staff, in part because he leaned too much on Wall Street types like Timothy Geitner. But he was also advised by first-rate academic economists, like Christine Romer. And although he took advice from too many sources, and his economic plan seemed like one produced by a committee, such that the stimulus he got through Congress was too small by half, there was a stimulus and it did work. The data couldn’t be clearer.
But don’t businessmen, by the nature of what they do, understand economics? Sure, up to a point. Micro-economics, they understand very well indeed. But most of the successful businessmen I know took macro-economics in b-school, and hated it. It was, almost uniformly, their least favorite class. And there’s a reason for that. Classical Keynesian macro really is pretty counter-intuitive.
How does a businessman turn around a failing company? Well, you cut costs. You tighten belts. You refine the business model. You streamline. You rightsize. You impose what might be called an austerity regime. Candidate Romney was frustratingly vague about his economic plans, but the specifics he did offer were all along those lines. Cut spending. Balance budgets. Get the US fiscal house in order. All that austerity and sacrifice and cost-reduction and efficiency seem responsible, moral even. He would have acted, we think, like a grown-up.
But none of that is what classical macro calls for. Quite the opposite, in fact. Macro-economic theory calls for more spending, not less. It declares that deficits don’t matter in the short term. The government should borrow massive amounts of money, go much much deeper into debt, and get more money circulating in the system. Look at the US economy back in 2012, when Romney was running. Companies were sitting on quite immense amounts of cash. But they weren’t using it to hire people, or to invest, or to bring out new products, or to innovate. Their research was telling them that there was insufficient demand to warrant any kind of business expansion. And they were right. Unemployment kills demand. What was needed was to get people back to work, get them paychecks, get them spending.
The reason conservatives loathe Keynes is because all of that seems ridiculous, desperately irresponsible, immoral even. With the economy in recession, tax receipts go down. Government has even a more difficult time paying its bills. And you want to borrow more? Spend more? That’s just insanity.
And so, in the European Union, where economic decisions are largely driven by banks and bankers, they tried austerity. The emphasis has been on debt reduction, cutting spending. And it hasn’t worked. The big news in Europe right now is Greece, who, in a recent election, voted in Keynesians. With forty percent unemployment, they have to try something. Greece may leave the EU entirely, may drop the euro as currency. Because the Greek people are fed up with austerity. So are the Spanish people, and Spain is looking at Greece with great interest. And they’re right to be skeptical of austerity. There’s a reason Paul Krugman’s book is a best-seller in Europe. As counter-intuitive as it may seem, macro-economics is what works.
Governments can do things that families can’t do, and that businesses can’t do. One is to borrow very large amounts of money. And print money. And spend money. And those happen to be the things that can pull a country out of recession.
In the US, states generally can’t deficit-spend (most states have constitutional amendments requiring balanced budgets). And so the biggest driver of unemployment in the US were state governments. We actually saw pretty decent private sector job growth in 2009-10, but those growth numbers were overcome by states laying off public employees–teachers, cops, firemen. That was the step Obama missed. He should have doubled the stimulus money, and just passed it the surplus on to the states. So the US economy has recovered piecemeal, in fits and starts. We never did quite commit to Keynes and to macro. But our economy has recovered, not completely of course, but certainly better than the economies of our European allies have done, faced with identical circumstances and problems.
I think that Romney, if he had won in 2012, would have immediately cut spending, and made budget-balancing his highest priority. And the recovery was still pretty fragile two years ago. I think that Romney, if elected, would have presided over another recession, as devastating as the one in 2008 proved to be. I think he would have been another Hoover. Another good, decent, hard-working man, but a really really really bad President.
But let’s suppose, instead, that Romney had been President in a different time. Let’s suppose that he were President in 2001; that he had won the Presidency instead of George W. Bush. I think Romney could well have been the right man for the job, then.
What were the biggest mistakes of the Bush Presidency. Well, first and foremost, the Iraq war. In the wake of 9/11, would Romney have attacked Iraq? The wrong country, a country that had nothing to do with the attacks on us? We don’t actually know why Bush pushed for the Iraq invasion, but one reason, one we heard repeatedly, was that he was still angry that Saddam Hussein had tried to murder his father. Not a factor for Romney. And surely Romney would have been better advised than Bush was. (For one thing, Romney is unlikely to have chosen Dick Cheney as his running mate). And I believe that Romney did not have the sort of personality to think that, since we’d been attacked, we needed to attack someone else.
And I think it’s very likely that Romney wouldn’t have pursued the Bush tax cuts. Those tax cuts were really quite sensationally ill-conceived. They accomplished nothing, except let rich people get richer and to shatter the idea of fiscal responsibility. With a Republican congress, the early Bush years were an orgy of pork barrel spending, combined with utterly, completely unnecessary cuts to the taxes of the one percent. With an economy humming neatly along, we didn’t need stimulus spending. What was needed then was deficit and debt reduction. Remember, Keynes generally liked balanced budgets. He generally liked spending cuts. Stimulus efforts were only needed during demand-side recessions.
I think Romney would have brought a CEO’s mentality to the Presidency, and that would have meant sound management, and a sensible approach to budgeting. No ‘heckuva job, Brownie’ moments for Romney. He would have expected FEMA to do its job, and he would have fired people for proven incompetence.
Of course, the signal moment of the Bush Presidency was 9/11. And while Bush was praised for his handling of that national trauma, there’s no reason to suppose that Romney wouldn’t have done every bit as well.He would have handled the symbolism, given the speeches, thrown out the first ball at Yankee Stadium. Any President would have.
Of course, this is all conjecture. In fact, the President from 2001-2009 was George W. Bush, not Mitt Romney. And the economy did implode, and poor President Obama ended up having to deal with it. Which he did quite well, all things considered. Romney’s moment in the sun came at a time when his specific skill set was, actually, precisely what wasn’t needed. He didn’t win, and I’m grateful for it. But he had skills, and in other circumstances, I think he would have done very well indeed.