6 big ideas Romney could embrace

The Fiscal Times dug through work done at Columbia and Harvard for economic ideas not being discussed by the GOP nominee on the campaign trail.

By The Fiscal Times Oct 29, 2012 12:01PM

The Fiscal Times logoCorbisBy Josh Boak

On economic policy, Mitt Romney makes his own decisions.

The former Massachusetts governor and private equity executive considers the advice from his cadre of economics Ph.D.s but ultimately charts his own course, according to the Romney campaign. President Obama has knocked the resulting policies as vague. But two of Romney's leading advisers who both served as chairman of George W. Bush's Council of Economic Advisers have some novel ideas that haven't gotten much airtime from the candidate—and even contradict some of his proposals.

Since those ideas could easily become part of the conversation in a Romney White House, The Fiscal Times dug through the work of Columbia University's Glenn Hubbard and Harvard University's Greg Mankiw  for the six big ideas not being discussed by the GOP nominee on the campaign trail.

No More Cheap Oil

Here's the core of the Romney energy policy: Strip away federal restrictions; drill more for oil and natural gas; ink a partnership with Canada and Mexico, and, voila, energy independence for all of North America and three million new U.S. jobs.
"If the president's energy policies are working, you're going to see the cost of energy come down," Romney stipulated at the Oct. 16 presidential debate. But it will take higher prices to break our addiction to petroleum, according to the 2010 book, Seeds of Destruction, co-written by Hubbard and Peter Navarro, an economics professor at the University of California, Irvine.

The book recommends charging a "flexible" tax whenever oil prices fall below a minimum target. Guaranteed higher prices would cause Americans to fuel up less often—cutting down our petroleum imports, reducing our trade deficit, and increasing our gross domestic product.


"For example, if the world price of oil is $80 a barrel and the target $100, the initial fee is $20 a barrel. However, if the world price moves up toward the target rate—say, to $90—the fee falls to $10. Moreover, whenever the world price moves above the target, there is no fee! . . . We also believe that any revenues raised from such a fee should be given back to the American people in the form of tax cuts."

That plan has a trade-off. If the White House and Congress agreed to the $100 level used in the book, the $3.54 a gallon average that Americans currently pay for gasoline could become the lowest possible price at the pump.

Tax Carbon Emissions

Many scientists argue that the consequences of climate change can be witnessed in extreme weather patterns—droughts, intense hurricanes, and a level of volatility that defies seasonal norms. Mankiw argued in a 2009 paper that taxing carbon emissions would help stem climate change.

Taxing things that cause high social costs—like cigarettes because of lung cancer—comes from the English economist Arthur Pigou. In his paper, Mankiw accepts the scientific conclusions about global warming at face value and discusses how charging taxes can occasionally produce benefits for society, even noting that a congestion tax would reduce traffic.

"Discussing the size of a carbon tax, rather than alternatives to it, would be a big step forward compared to where the public discussion is right now," Hubbard wrote. "As judged on purely political terms, higher Pigovian taxes are a wacky idea. I have yet to see a major candidate for President endorse the concept….We can hope that in future elections the gap between the advice of the economic advisers and the advice of the political consultants will become a lot smaller."

Romney, like some scientists, is uncertain whether climate change is manmade. "The idea of spending trillions and trillions of dollars to try and reduce CO2 emissions is not the right course for us," he said at a campaign fundraiser, according to NPR. But Romney would actually go a step further, proposing in his 59-point economic plan, "Believe in America," to amend the Clean Air Act and stop the government from regulating carbon dioxide.

All Medical Expenses Become Tax Deductible

Hubbard thinks that tax incentives have caused health care costs to surge, putting pressure on American families and the federal budget. The single largest tax break ($184.4 billion a year) comes from employer-sponsored health insurance. These plans "insulate consumers from the true costs" of treatment and "leads to a whole range of wasteful medical practices," Hubbard argues in his book.

But because it would be "a huge political hot potato" to get rid of the deduction, he prefers to extend the deductions to all individual medical expenses, so that more people would have incentives to buy their own health insurance with higher deductibles and—as savvy consumers—control costs.

Paul Fronstin, a senior research associate with the Employee Benefit Research Institute, noted that about 20 percent of the population accounts for 80 percent of all medical spending—and it's highly uncertain about how their spending habits would change under this plan.

"We're already moving in this direction to get people to use less health care, yet premiums are still increasing at twice the cost of inflation. Will changing the tax structure change the way they use health care?" Fronstin said. "I want to see the numbers before I say this will work or won't work."

Refinance 14 Million Mortgages

Along with his colleagues Alan Boyce, Chris Mayer, and James Witkin, Hubbard developed a plan to refinance mortgages for as many as 14 million Americans, saving them more than $2,500 a year on average.

Their proposal applies to borrowers with fixed-rate mortgages from Fannie Mae and Freddie Mac who have been current with their payments for at least three months. It streamlines a process that has been road blocked since the housing bust, and resembles a plan sponsored by Rep. Dennis Cardoza, D-Calif., Sen. Barbara Boxer, D-Calif, and Sen. Johnny Isakson, R-Ga.

The additional $2,500 a year would essentially be a constant form of stimulus. But Romney famously told a Nevada newspaper last year that the government should not intercede with the housing market and let it hit the "bottom." The Romney campaign in September released a vague plan promising "foreclosure alternatives" for struggling homeowners.

Thumbs Up for Ben Bernanke

Mankiw dubbed the second round of quantitative easing, known as QE2, by the Federal Reserve "a small but risky step in the right direction," on his blog in 2010. He also congratulated Fed Chairman Ben Bernanke in The New York Times for keeping inflation so far near the central bank's 2 percent target.

Romney has made no secret of how much he dislikes Bernanke. As noted by Bloomberg News, the Republican nominee told Fox News in August that he wants someone "who shared my economic views" and ensures "monetary stability that leads to a strong dollar and confidence that America is not going to go down the road that other nations have gone down, to their peril."

End Capital Gains and Dividend Taxes

Romney would end all taxes on investment gains for those earning less than $200,000, giving them an incentive to save. For those with larger incomes, he would maintain the current tax rates of 15 percent on capital gains, interest and dividends.

Hubbard recommends ending all taxation on investment, creating an income tax that focused more on consumption, known as a value added tax (VAT). "Such a 'progressive consumption tax' meets the most important challenge of stimulating growth by providing maximum incentives for individual saving and business investment while removing the double taxation of capital income," he wrote.

While the Columbia economist pitches the idea as a bipartisan "middle ground," not all progressives see it that way. As proposed by Hubbard it would skew toward the wealthy, while the Romney plan would apply to Americans without much income to save, said Chye-Ching Huang, a tax policy analyst at the Center on Budget and Policy Priorities.

"These people are much more likely to spend any resources they have," Huang told The Fiscal Times. "There's very little evidence that if you give these people a tax cut on dividends that they're going to save more."

Josh Boak is a National Correspondent at The Fiscal Times. Subscribe to The Fiscal Times' free newsletter.


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13Comments
Oct 30, 2012 10:22PM
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Okay, enough is enough. It is the current president who is forcing the same kind of socialist health care model that is failing MISERABLY in Europe right now down our throats. It is the current president who has promised to rob 700 BILLION dollars from Medicare to pay for it. It is the current president who sent MILLIONS of $ in 'stimulus' to 'green companies', some of which spent every dollar then went bankrupt. It is the current president who CONTINUES to unabashedly deny THOUSANDS of good paying jobs to hard working Americans by blocking completion of the Canadian oil pipeline. Under this presidents watch HIS administration implemented a cock-a mamie policy called 'fast and furious' which sold guns to drug runners ostensibly to track them back to drug lords. But one of those guns was used to murder a federal agent near a border to Mexico that LOOOONG ago should have been closed. THIS president talks'a plenty about a 'path to citizenship' for people who entered this country illegally. But he cant bring himself to firmly attach himself to ANY comprehensive plan to stop people from coming here by breaking the law. And you folk want ANOTHER 4 years of this? REALLY??? Not me. Nope...nada...nyet...not a chance. I will vote for change in less than a week now. Change is coming, and not a moment too soon. Get ready for it....consult your check list; crying towels? Excuses? 'The sky is falling' dogma? We're ready for that too....Just another voice....
Nov 1, 2012 10:34AM
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"Dr" K,
You are obviously not very bright.  First, try spell-check...and, perhaps, a grammar review tool.  Maybe, English isn't your first language...if that's the case, then I understand, and no offense intended.

 

But you also don't understand economics (or even basic math), it seems, per some of your comments/perspectives.

 

Your buddy, Obama, it appears, is intentionally railroading the US economy (with significant impacts to the global macro-economy), and you say he'll prevent total collapse?  I almost hope you get what you want, so you can learn a hard lesson about the economy and the amateur who currently presides in the White House.

 

As for taxes of the wealthy, refer to the below...  Surely you don't expect someone who make millions per year to pay 30% of that in taxes...really?  Of course they pay a lower percentage.  Yet, the top 50% pay 97.75% of all federal taxes.  The top 10% pay ~70.5%.  Romney says this will not change, and I believe it's easy to make the case.  Simplify the tax code, lower the rates, reduce the reductions.  It's just not that complicated.  And with more people working, and more people paying taxes, we get more tax revenue without pushing more pain to the middle class.  It's simple economics/math...relative cost spread over more working people.  Increase the denominator, and you get a reduced result per relative numerator.

 

Romney paid a rate of 14.1% in 2011, but he could have paid less.  He gave $4M to charities, but only claimed $2.25M.  Based on his $13.7M income, you do the math on what he gives back to people via charity, plus his $2M in taxes to the federal government.  So he basically kept half of what he earned, much like you and I (if you have any self-responsibility at all...I actually kept more than half).  Look at the dollars, not the percentage...and look at the relativity of dollars earned to dollars kept.  And take a course in economics, for goodness sake.

 

Percentiles Ranked by AGI

AGI Threshold on Percentiles

Percentage of Federal Personal Income Tax Paid

Top 1%

$343,927

36.73

Top 5%

$154,643

58.66

Top 10%

$112,124

70.47

Top 25%

$66,193

87.30

Top 50%

$32,396

97.75

Bottom 50%

<$32,396

2.25

 

Oct 31, 2012 12:20PM
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How about a list of items Obama could embrace, or would that be too long an article?  Geez, the guy isn't even President but you want to bash him.  How dumb do you think we are?
Oct 29, 2012 11:42PM
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Here are 6 big ideas:
Increase taxes on those making over $500K yr / household.
Close offshore tax havens used by unpatriotic Americans and mega corporations.
Close tax loopholes for multinational corporations that offshore jobs and manufacturing.
Create incentives for corporations that hire full time employees in the USA and open new plants in the USA.
End subsidies for big oil, big pharma, and factory farms.
Tell Paul Ryan to shove his economic policies where the sun don't shine.

Good luck.


Oct 30, 2012 11:40PM
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ROMNEY MANY TIMES YOU HAVE GIVEN YOUR OPINION ABOUT "FEMA". YOU WANTS TO CUT THE MONEY FOR FEMA AS RYAN AND CANTOR DID A WHILE BACK! YOU WANT TO MAINTAIN A FORM OF FEMA WHEN YOU BECOME PRESIDENT, AND GIVE THE BUSINESS OF PROTECTING OF OUR CITIZENS IN THE EVENT OF STORMS, EARTHQUAKES, HURRICANES TO A PRIVATE AGENCY TO MAINTAIN THE ORDER AND RESCUE OPERATIONS OF OUR CITIZENS. WITH THIS MASSIVE STORM THAT HIT US SO HARD, A PRIVATE BUSINESS TO PROTECT THE PEOPLE HAD BEEN A JOKE. NO PRIVATE FIRM CAN MOBILIZE THOUSAND OF GOVERNMENT PERSONNEL AND FIRST RESPONDERS ALL OVER OUR COUNTRY WITH PRECISION, ENERGY, TRUST AND PERSEVERANCE, AND FAST RESCUE PROCEDURES THAN A WELL ORGANIZED GOVERNMENT AGENCY TO HELP OUR PEOPLE CAN DO ---SO ROMNEY LEARN A NEW LESSON, WE DO NOT WANT YOU BECAUSE YOU WILL GIVE THE SALVATION OF OUR PEOPLE TO A JUNKY AGENCY THAT WILL BE SLEEP DURING THE WHOLE DISASTER! YOUR AGENCY WILL BE A DUPLICATE OF BUSH FEMA, AND THAT WE WILL NOT TOLERATE THIS TIME. SO GO ON TO YOUR CAR ELEVATORS AND MONEY A LEAVE US ALONG. VOTE FOR OBAMA THE TRUE CARE PRESIDENT ON NOV 6, 2012

Oct 31, 2012 10:01PM
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One thing romney could embrace is to stop the Bain Corporation taking jobs to china! The big news today Oct 13, 2012, is that another Company in Illinois making sensors (SENSATA), for automobiles was closed a week ago, all personnel terminated ( FIRED), with no job because the Company presently owned by Bain Corporation decided to make a larger profit by outsourcing the Company! All equipment and assembly of sensors work is now quickly outsourced to China! This is the sickness that has been killing us, our economy, and our working force for the last fourteen years , as you know it all began with Bush, Mitt Romney and the Bain Corporation, and many other Large Corporations in the USA. We better stop outsourcing our work to other countries now or we will die as a powerful country! I can't believe we still have the courage to blame Obama for the problems of lack of jobs in our USA for the last four years. Just give the citizens a brake, and stop making more lies of why the economy does not make good progress, to include the perversity of Congress a snake nest of Tea Party, and Republican members opposing every Jobs Bills that Obama proposes.
You need to know that from 2000 to 2008,the Bush years, 8.3 million service, and assembly jobs have been outsource to China, India, and Mexico! Mitt, you are a lost cause; you change your mind every time you get out of bed. You are very dangerous to the American people because we do not know for sure what you are going to do if accidentally you become president, with your liar side kick Ryan, you will take many position dealing in foreign policy, and will prove to be a killer for us, like Iraq and Afghanistan nightmare. Citizens wake up, vote for Obama president on November 6, 2012 or earlier!
Oct 30, 2012 12:36AM
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McCain, any member of the Senate that supposely knows all about politics and selected a Moron as Palin for VP, and doing such a terrible mistake that could have put our USA at the mercy of all kind of political perversion, with no expert inteligence guidance us needs to be very stupid! Now you are endorsing Romney, but you need to learn from the Palin lesson if you trust him at all, and the response is NO trust, but he's a Republican ! Romney, you presently have worthless political policies, and multiple wrong proposals for the present economy that will not work to help us in the future! Very soon as your ego feeds your enthusiasm for the White House you will find failure, all because the briefcase you carry is full of empty promises to the middle class. You speak with a false tongue every opportunity you have to addresses the ignorant that attend your meetings as you are are a well known liar, and much better pushing hypocritically false promises to the American people. You did not win the fourth "Presidential Debate", but you purposely confused sixty five million viewers all the way trough the 90 minutes duration of your messy palabras showing your own ignorance in Foreign Politics ! You truly have become too confident! You think you are on a political success on a roll on winning the Presidency. But Romney, your lies are now fully discovered by the humble citizens of the 47% middle class, now depressed for eight years by Bush politics, and dishonest policies ! The sixty five millions of television viewers saw you putting a fake performance and talk stupid Universal Political policies. Your unprecedented confusion in all Foreign Political topics that Obama had to correct you all the time. You Romney, will fade away as the million viewers now know you brain only work to make millions of dollars in Outsourcing American jobs to China! Finally you know nothing about Foreign Politics, and you are very dangerous for our USA if you take the presidency, soon smart citizens will push you into the darkness of rejection forever. Citizens, vote Democrat for OBAMA, and get the best president to protect us from outsourcing jobs, and full economic collapsed

Oct 30, 2012 12:03AM
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JUST FORGET BENGHAZI FOR NOW, AND CONCENTRATE IN ELECTING THE BEST PRESIDENT FOR OUR DEAR COUNTRY. NOW READ THE THINGS I WOULD LIKE TO TELL ! ROMNEY ROCKS HAPPY TODAY, HE'S TAKING THE OPPORTUNITY OF THE MASSIVE STORM CREATING HAVOC IN OUR LIVES WHILE HE'S PRESENTLY CREATING ONE STORM FOR OBAMA OF HIS OWN TWISTED IMAGINATION, HE IS IS JUST MACHINING ANOTHER SICK PUBLICITY HAVOC, BUT HE SELECTED A BAD DAY TO DO IT! DEBUTING TODAY ON TELEVISION, A NEW ROMNEY CAMPAIGNED PROMOTION ADD, THAT IS WRONGLY INFORMING THE CITIZENS OF OUR COUNTRY OF A NEW ROMNEY MASSIVE CREATED LIE ABOUT CARS, BUT THIS TIME IT IS A JEEP MANUFACTURER. HE ADVERTISED THAT " THE JEEP CORPORATION HAVE MADE A DECISION TO SHIP THE MANUFACTURING OF JEEPS TO CHINA". THE WHOLE PROMOTION IS A FABRICATED CAMPAIGNED AND ABUSE PROPAGANDA BY ROMNEY, AS HE ALSO TOLD THE LIE TO SOME OF HIS FOLLOWERS IN A FEW OF HIS HIS VISITING STATES. HIS PROBLEM IS THAT THE "THE JEEP CORPORATION ISSUED A LETTER OF ACKNOWLEDGMENT THAT ROMNEY WAS WRONG , AND THE CORPORATION HAS NO INTENTIONS AT ALL TO MOVE ANY MANUFACTURING OF JEEP TO CHINA" THIS IS VERY BAD FOR THE HONESTY OF A MAN THAT WANTS TO BE A PRESIDENT, ONE MORE TIME HE SHOWS HIS TRUE COLORS OF BEING A WORTHLESS LIAR, AND CANNOT BE TRUSTED. WAKE UP AMERICA BEFORE IS TOO LATE. DO YOU WANT A LIAR AS YOU PRESIDENT? I DON'T THINK SO! VOTE FOR OBAMA FOR PRESIDENT TUESDAY, NOV 6, 2012, AND WE WILL SAVE THE COUNTRY FROM TOTAL COLLAPSED. THIS GUY PRODUCES NO PAST TAXES, HIDES MONEY OVERSEAS ACCOUNTS, PAY LITTLE TAX, AND WANTS TO BE PRESIDENT. COME ON PEOPLE OF OUR DEAR COUNTRY, ARE YOU GOING TO VOTE FOR THIS LIAR? VOTE FOR OBAMA AS SOON AS YOU CAN!
Oct 30, 2012 12:53AM
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Romney plan = Lower taxes = Lower revenue = Higher deficit...

oh that's right, he wants to get rid agencies like FEMA to save money so wealthy people don't have to pay higher taxes....now tell that to all the people who are in the middle of one of the worst storms in history who are going to need help.

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