Saturday, July 2, 2011

Fact-Checking Mitt Romney

In a nice piece of political theatre, on Thursday Mitt Romney stood in front of the shuttered Allentown Metal Works plant, the same plant President Obama had visited the year before while trying to promote the benefits of the administration's economic stimulus plan. Said Romney: “The plant here had been open 100 years. It survived the Great Depression. It couldn’t survive the Obama economy.”

How exactly did Obama's policies cause the plant to close, one might ask. Romney doesn't say.

What exactly would Romney have done had he been president that would have allowed the plant to stay open? Romney doesn't say.

It turns out that this particular plant had been struggling financially for years. According to an article in Slate, the new owner of the plant who took over back in 2005, defaulted on some loans and now is embroiled in a lawsuit with another company that took over the plant in 2008. The last gasp of hope for this plant was the Obama stimulus program, which the owners hoped would allow an opportunity for the plant to profit from construction projects. Unfortunately, the stimulus construction spending was too small to provide any relief for this particular plant. What this means is that if Obama's policies caused the plant to fail, it was because the stimulus spending was not ambitious enough, not that the stimulus itself was a bad idea. (See some other good coverage in the Lehigh Valley Independent blog.)

But remember Romney, and all of the other Republican candidates, have been going around saying that the whole stimulus was a failure. The stimulus was opposed by practically every Republican in Congress. Since Mitt Romney never explains how the president's economic policies caused the Allentown factory to close, we have to go with the only explanation out there, which is that the closure was caused by Republican failure to agree to as large a stimulus program as the Democrats wanted. And if that isn't the explanation Mitt, then the only other thing you can possibly be saying is that every time a business fails, it must be the government's fault. Surely that can't be the message that Republicans who believe in the power and responsibility of private enterprise, want to project.


  1. With the value of hindsight, do you have an opinion (1) on what Obama's policy should have been (2) should be going forward?

  2. When you can borrow money for essentially nothing, and when you have a lot of needed infrastructure projects in the country, whether that is investing in schools or roads or energy, or a whole bunch of other things we need to do to keep up with the rest of the world, and that will benefit all of us in the future, it seems obvious to me that we should have been doing a lot more of that, and should be doing more of that in the future. A lot of economists said that the stimulus program needed to be much larger, probably at least twice as large, and it needed to focus on infrastructure spending and aid to the states, instead of so many tax cuts. When we see so many state governments in financial trouble due to declining sales tax and property tax and income tax revenue, and when we see that unemployment is still too high, that would seem to confirm that the stimulus spending was inadequate.

    What we should not be doing in the short term is worrying about the budget deficit. If the deficit were a problem, you would be seeing interest rates going up. But they're not. So the deficit is only a problem in the medium and long term, and it can be fixed mostly by raising tax rates back to where they were 10 or 20 years ago.

    Right now we have high unemployment, and we have severe disparities in wealth such as we have not seen since the 1920's, and we also have historically low tax rates and historically low interest rates. We need to bring all that back into some kind of balance.

  3. Thanks for sharing your thoughts. It is interesting how economist from sides of the spectrum are sure they have it correct. Of course, the chances of both Keynesian economics (the Krugman Wonderland) and classical economics (choose your boogeyman) both being correct are slim. We may never know who is correct as policy will likely be a compromise of the two extremes.