News Column

Economic Outlook: Not Rocket Science

Oct. 8, 2012

Anthony Hall

currency

Former Massachusetts Gov. Mitt Romney might have the right economic strategy for the moment, but calling him a visionary is a bit of a stretch.

Let's put it this way: Romney's strategy for helping the economy is timely and correct for the moment. Romney is, essentially, following the game plan laid out by President Ronald Reagan in the 1980s, which is to let businesses do their thing with reduced regulations and lower taxes, plus a threat to Big Bird. Then provide economic stimulus through military expansion, but don't call it stimulus. Call it paranoiac upgrades.

The difference between building fighter jets and green energy is that military equipment, like it or not, has more customers. Romney has already laid out the hints there. He said in the presidential debate last week, he's a revenue man.

Is this the mark of a visionary? Reagan had a college degree in radio communications, got into acting and, very similar to Romney, made a career out of having a cleft chin. No, neither one of these men is exactly a visionary.

President Barack Obama is sincere, compassionate, in touch with the country and is tripping over two left feet in economic policy. The reason is not because he is wrong about how to approach the nation's economic ills. The reason is bad-timing.

The economy needs different nudges and guidelines at different times. Economic visionaries are like chess players looking into the future and planning three moves ahead. Romney and Obama are reactionaries, not visionaries. Obama just happens to be out of sync, not wrong. Romney is fortunate the pendulum has swung his way for now. It's an accident he hopes to turn into an election victory Nov. 6.

Think it through this way: When the economy is going great guns and prosperity is upon us, unemployment goes down and the government's coffers are overflowing with tax revenues. The surplus goes from sublime to ridiculous and that's when politicians puff out their chests and, taking all the credit they can, begin to lower taxes and sneer at the administration before them that had the meanness of spirit to raise taxes in the first place.

"It's embarrassing to keep all this money. We're giving everyone a tax break," say the lucky presidents.

Conservative economists have a word for that. The word is stupid.

Therein lies a fork in the road as far as terminology goes. Conservative economists are those who believe you cannot save enough for a rainy day. Conservative politicians believe generosity and smaller government are one and the same.

There's a big difference. You can, by definition, be a conservative economist with a large or a small government. Saving for a rainy day has nothing to do with the size of the government or same sex marriage or stem cell research or whether your politics are blue or red. It just has to do with surplus and balance.

The opposite of a conservative economist is not a liberal economist. The opposite of a conservative economist is someone who takes risks with money.

That said, how smart do you have to be to understand there will always be hard times and untimely wars and environmental crises from time to time? If you don't save up for those, you're not leading anybody.

Here's what economic visionaries do: When times are prosperous they close loopholes. They might even sneak in a tax hike. After all, higher taxes during prosperity are less noticeable, because the standard of living is going up, regardless.

When times are tough, Democrats are right to maintain large social programs. Why? Because times are tough -- that's why.

When times are tough, Republicans are right to lower taxes. Why? Because times are tough, that's why.

A true visionary might even lower taxes and maintain high levels of spending, but can only do that if a very conservative economist prepared the way for them to do that.

Yes. It's counterintuitive. You don't rock the boat when times are tough. You raise taxes precisely when you don't have to.

Whether you have a big government or a small government, there is never enough prosperity. To the last guy to lower taxes: dumb move.

In international markets the Nikkei 225 index in Japan lost 0.44 percent while the Shanghai composite index in China dipped 0.56 percent. The Hang Seng index in Hong Kong shed 0.89 percent while the Sensex in India dropped 1.21 percent.

The S&P/ASX 200 in Australia lost 0.28 percent.

In midday trading in Europe, the FTSE 100 index in Britain slipped 0.66 percent while the DAX 30 in Germany fell 1.2 percent. The CAC 40 in France fell 0.96 percent while the Stoxx Europe 600 gave up 0.84 percent.


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Source: Copyright United Press International 2012


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