R. Glenn Hubbard, N. Gregory Mankiw, John B. Taylor, and Kevin A. Hasset released a white paper on the failings of President Obama’s economic policies. The professors also pointed out what they expect will be effective policies as proposed by the former Massachusetts governor.
In short, they criticized Mr. Obama’s policies as being wasteful and short term, citing programs such as Cash-for-Clunkers and home mortgage modifications. I agree with professors on that point. These programs have done nothing for long term economic growth, appearing, in my opinion, to appease short term needs of a few select groups like the auto industry unions for example.
I couldn’t agree with the professors on the hype they put on Mr. Romney’s policy proposals. In short they are:
1. Stop runaway federal spending and debt;
2. Reform the nation’s tax code to increase growth and job creation;
3. Reform entitlement programs to ensure their viability; and
4. Make growth and cost-benefit analysis important features of regulation
The professors believe that reducing regulatory uncertainty could come about by capping the level of federal government spending at 20%. I disagree. Reducing regulatory uncertainty is a lot more fundamental than that.
We should instead ask ourselves a number of questions. Why do we want to regulate the behavior of these players in the first place? Are we sure the market is not sufficiently keeping their behavior in check? Is there a reason why we should expect or want a market to be made in the first place? Is government a necessary player in the market we are addressing? Address these questions and we more directly address the issue of runaway federal spending and the debt we enter in order to finance it.
On taxes, Mr. Romney wants a 20% across the board cut on marginal tax rates, a reduction of taxes on capital gains and dividend income, and a flatter tax base. Mr. Romney could make his proposal a lot simpler. Introduce a flat tax and get rid of all consumer and business tax loopholes.
On regulation, Mr. Romney is spot on. If a regulation does not promote economic growth, scrap it. If a regulation does not pass a cost/benefit analysis, don’t pursue it. Good government, in my opinion, means implementing effective programs. Best government means implementing the barest number of government programs possible.