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November 7th


Though the broad contours of the Ryan plan amount to a nonnegotiable demand thrust upon Romney by the Republican Party, there are significant gaps within the plan that leave Romney room to maneuver and that, we can imagine, he will use to his advantage. Because, starting January 20, Romney will be faced with the same crushing pressure Obama has endured for the past four years: an anemic economic recovery. If he intends to win reelection, Romney will have to come up with some plan to improve our job numbers.

Here’s where his administration could get surprising. Romney has built his campaign on the promise of alleviating the immediate pain of the recession, yet his program to reduce unemployment is vague bordering on nonexistent. (“If we win on November 6th, there will be a great deal of optimism about the future of this country,” he told donors during his infamous, secretly recorded Palm Springs diatribe. “We’ll see capital come back and we’ll see—without actually doing anything—we’ll actually get a boost in the economy.”) Republicans fervently believe the Ryan plan would restore prosperity over the long run, but even they recognize it has essentially no relation to the economic maladies of the moment. The Obama administration’s approach to the economy has been to follow the tenets of Keynesian economics, which prioritizes stimulating consumer demand (through government spending and/or tax reductions), by deliberately jacking up short-term deficits. During the 2001 recession, Republicans agreed with this theory—advocating quick tax cuts—and they appeared to be heading in the same direction in early 2008. But since Obama’s election, they have turned wholesale against Keynesian economics, instead suggesting that an immediate reduction in deficits could boost the recovery. Recent history, especially in Europe, has not been kind to these austerity enthusiasts.

The thing to keep in mind, though, is that Romney and his advisers have never bought into their party’s anti-Keynesian mania. The two main economists advising him, Columbia’s Glenn Hubbard and Harvard’s N. Gregory Mankiw, argued for short-term deficit spending at the outset of the crisis. Mankiw actually wrote a New York Times op-ed shortly after Obama’s election that began, “If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes.”

Romney has held his cards close. Generally, he has advocated smaller deficits without specifying whether he means long-term deficit reduction or immediate deficit reduction. (And horse-race-obsessed interviewers have not bothered to pin him down.) On occasion, he has slipped into what sounds a lot like the Keynesianism of his top economists. Last month, Romney told 60 Minutes he would phase in his spending cuts “in a very careful way, such that we don’t have a huge drop-off with an austerity program that puts people out of work in government.”

Even more tellingly, these sorts of comments have provoked almost no reaction from the right. Every time Romney lets slip some word of praise for his handiwork in designing universal health care in Massachusetts, the right scorches him with cries of treason. That the ideological commissars of the GOP have permitted him to harbor full-scale heresy on the question of Keynesian economics suggests that the party’s new austerity doctrine has laid down shallow roots.

This extends all the way to the most vocal of the party’s self-described deficit hawks. As some of us have noticed, Ryan has billed his budget as a deficit-reduction proposal, but it contains little explicit in the way of deficit reduction. Indeed, the parts of the plan with specified policy changes contain far more in the way of deficit increases (tax cuts, defense-spending hikes) than in deficit reduction (generalized intentions to eliminate tax deductions and reduce domestic spending).

The skin-deep commitment to immediate austerity and the vagueness of the Ryan plan both point in the same direction. Conservatives will hold Romney to his commitment to the Ryan plan’s long-term dismantling of government, but allow him to put off the vast bulk of deficit reduction. Republicans have established a clear record of screaming bloody murder over deficits during Democratic presidencies and then losing all interest in the topic when they occupy the Oval Office. And Romney would have any number of tools available to him to delay the hard decisions: magic asterisks, rosy scenarios, tax-reform commissions, bipartisan panels, etc.

Even better, from Romney’s perspective: A plan that increases deficits in the short run allows him to offer a political olive branch to Democrats without breaking faith with his own base. They’ve been calling for more stimulus since 2009, haven’t they? Well, here’s their chance! This was the approach Republicans used during George W. Bush’s first term to Shanghai Democrats into voting for their tax cuts. They would attach the short-term stimulative tax cuts Democrats demand (focused more on the middle class) to long-term tax cuts for the rich, and dare Democrats to mock their own constituents’ economic pain by opposing it. Romney may not win over large numbers of Democrats this way. But the forces that will bear down on Romney—Republican demands for the Ryan plan, the beliefs of his own economic advisers, his political need to bring down unemployment quickly, and the benefits of at least the appearance of bipartisanship—all converge on the same strategy: quickly pass the Ryan plan, couple it with middle-class tax breaks, and put off many of the nastiest cuts to middle-class services for the future.


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