Thursday, September 6, 2012

Romney's Economic Plan

Where does Governor Mitt Romney stand on some of the most important issues in this 2012 Presidential election? To find out let’s go right to the source - Mr. Romney himself.

According to Governor Romney the most important area in this election year is the nation’s economy, which covers government spending, taxation and employment. Therefore, that is what this article will focus on. The Romney campaign has listed several ways in which he plans a positive turnaround for the U.S. economy, one that he considers both clear to understand and realistic in its ability to be achieved. He has defined his plan as “Cut, Cap, Budget and Balance.”

The Governor’s first goal is to cap spending at 20 percent of the Gross Domestic Product (GDP) by the end of his first four year term in office. Last year’s spending under President Barack Obama had risen to a little over 24 precent of GDP. The average rate has historically been between 18 to 20 percent, even during times of past economic distress. He is calling for federal spending cuts to the tune of $500 billion each year by 2016 with an annual 4 percent growth rate while replenishing Obama’s cuts to national defense. Romney claims he will be able to immediately cap non-security discretionary spending to their 2008 level. Non-security discretionary spending is spending that is required by Congressional law such as social security, medicare and medicaid. Normally these kind of expenditures have a built-in cost of living increase feature. To change these spending laws requires an act of Congress.

On his first full day in office he plans on sending the Congress a request for a bill that would cut that non-security discretionary spending by at least 5 percent across the board, while encouraging passage of the original House Republican Budget Bill shot down during Obama’s tenure, thus allowing for that 2008 level.

Following this his next order of business will be the repeal of Obamacare, a move that Romney claims will immediately save the taxpayer $95 Billion. He will follow this up with the privatization of Amtrak, saving an additional $1.6 Billion per year, decreasing some subsidies like The National Endowments For The Arts And Humanities (NEA), the Corporation for Public Broadcasting (CPB) and The Legal Services Corporation (LSC). According to the Romney campaign much of the business of these three federally sponsored agencies is simply a duplication of services already provided by States, Local Governments, Private Organizations and Bar Associations. Also being targeted for cuts or elimination will be monies currently going to such things as Title X Family Planning Funding, a part of Planned Parenthood and a reduction in foreign aid. It has been estimated that these cuts and eliminations will amount to an additional $400 Million.

Romney wants to provide Block Grants to empower individual States to better control and organize efforts in the areas of Medicaid and the reeducating and training of workers for the skills needed for 21st Century jobs. The Governor believes that micromanagement on a federal level is not cost efficient and simply duplicates what should and could be done on a State or Local level of government adding another $100 Billion in savings. Finally, Romney wants to make the government more efficient and effective in the services it does provide by eliminating unnecessary waste, fraud and bills that do little more than duplicate already existing policy and law. All total this would save the taxpayer about $121 Billion.

This is what the Governor wants to do about the economy. The question is - how will he get it done?

STEP 1 - Entitlement Reform

“First, we must keep the promises made to our current retirees: their Social Security and Medicare benefits should not be affected. But second, we should ensure that the promises that we make to younger generations are promises we can keep.”

With Social Security the Governor says that he is looking at several different options for those younger citizens, such as raising the eligibility age or looking at different ways that benefits are indexed to inflation for high-income retirees. He is against raising the payroll tax, particularly on the middle income workers nor does he favor an expansion of the base of income to which the tax would be applied.

With Medicare, Governor Romney supports the objectives of Congressman Paul Ryan’s plan that was rejected by the Senate, however, while sharing the same objectives, Romney’s plan would differ on how it would be structured. How it differs in structure has yet to be made clear by the candidate, other than some vague recent statements about introducing market-based dynamics into the mix. Under the Romney plan Medicaid would be overhauled by no longer writing the States a blank check without accountability for how those funds are being distributed. Romney will push for the conversion of Medicaid to a block grant administered by the States. The campaign says this approach could save the federal government over $200 Billion each year by the end of the decade, while also providing States with the flexibility to develop innovative and effective approaches best suited to their individual needs.

STEP 2 - Reduction in the Size of Government

According to the Romney Plan the best way to reduce the government is first to cut back on the size of its work force - keyword - Government Jobs. This would be accomplished by aligning the wages and federal employee’s benefits package with those of the private market sector. The campaign projects that this competitive approach will eventually lead to a reduction in the overall size of the federal work force by 10 percent, mainly through attrition. How long it would take for the effects of this strategy to have a positive force on government spending is not laid out in the plan.

STEP 3 - Control Runaway Federal Spending

This will likely be the most difficult part of the Romney Economic Plan to achieve in any meaningful way, however, the Governor believes that holding the reigns on spending is the only way to ensure a stable economy and without it getting successfully accomplished all other efforts are doomed to ultimate failure.

Romney plans to attack the exaggerated, dysfunctional and duplicative “layers of bureaucracy that prevent government from serving the people.” This can only be done the same way it is achieved in a large corporation - by agreeing that the federal government is not and cannot be “everything to everyone.” Romney and his cabinet, aides, and working with Congress, will need to decide which functions and services currently controlled and run by the federal government could be better served by the private sector, State and Local governments. With an incentive to make money, instead of wasting the taxpayers monies, the private sector would be induced to succeed where the government has proven in its long history to sometime become lax in its ability or desire to provide the best service. Amtrak is just one of those federal services that Romney would turn over to the free market private sector for overhaul.

STEP 4 - Seek A Balanced Budget Amendment

I stated earlier that controlling runaway federal spending might be the most difficult task for a President Romney to achieve. I misspoke. There is no doubt that getting both sides of the Congressional aisle to agree to pass a Balanced Budget Amendment to the United States Constitution will be a monumental task that every President since Reagan has failed at. Time will tell, if elected, whether or not Romney will succeed where other great leaders have not.

Mitt Romney, if elected, has his work cut out for him. He will have to go up against a money happy Congress, both Democrats and Republicans, that haven't had to pull in its reigns of spending in the memory of anyone living today. Some of his proposals I have listed are admirable, some will be impossible to accomplish in eight years, much less four. However, if he is determined to get spending under control by not being afraid to tackle those big entitlements and those other sacred cows like the Pentagon, then he will at least begin the process of setting this nation’s feet back on a more solid economical footing. If elected I wish him nothing but success.

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