How the Economy Would Change Under Romney

Romney's reforms would be more marginal than revolutionary

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Mitt Romney presents himself as a stark contrast to President Obama. Yet if he were to become president and his economic policies were enacted, ordinary people might not notice much of a difference. And that helps explain why he's creeping so slowly toward the front of the GOP pack.

[Read about the 10 ways the economy would change if Romney were president.]

Of all the Republican presidential contenders, Romney is the least bombastic when it comes to the economy—and perhaps the most experienced. He's a graduate of both Harvard Law and Harvard Business School. His working career began in 1975, with a Boston consulting firm. In 1984, he started the private-equity firm Bain Capital, which ended up owning chunks of U.S. companies worth billions of dollars. Under Romney, Bain helped some of the firms in its portfolio--such as Staples and The Sports Authority--grow from small startups into national chains, while others struggled or went bust. It's not like Romney started out on the shop floor and worked his way up, but his corporate experience gives him direct knowledge of what it takes for companies to grow and create jobs.

Like all the other GOP candidates, Romney has bashed President Obama's policies and the economy's weak performance under his watch. If elected, he would certainly be friendlier toward business than Obama. But Romney wouldn't tear up the tax code, as Herman Cain wants to do, or remake Social Security, as Texas Gov. Rick Perry has proposed, or try to abolish the Federal Reserve, a Ron Paul hobbyhorse. If anything, Romney's views are establishmentarian--which explains why Tea Partiers are holding out for somebody more raucous.

Romney even owes a few of his policies to President Obama. Romney's tax-reform ideas, for example, are similar to those proposed by the Bowles-Simpson debt-reduction commission, which Obama set up last year. Other Romney ideas are GOP holdovers, and on a couple of issues he seems to diverge from GOP orthodoxy. Here's a guide to where Romney stands on 10 of the biggest economic issues, based on public remarks he's made, his 87-page economic plan, and a bit of handicapping about what his priorities might be if elected:

Income taxes. Rommey would leave tax rates where they are, which means he would make the Bush-era tax cuts—temporarily extended by Obama—permanent. He'd eliminate the estate tax and zero out capital gains taxes for earners with incomes below $200,000, to help middle-income Americans save for retirement. Eventually he'd pursue tax reform to make the system "fairer, flatter and simpler." Romney hasn't said how, exactly, but the Bowles-Simpson plan he has endorsed calls for lower rates that apply to more people, plus fewer deductions and exemptions for things like mortgage interest and the cost of employer-provided health care.

[See 12 ways to thrive in a stagnant economy.]

Corporate taxes. Lowering the corporate tax rate from 35 percent to 25 percent is one of Romney's "day one" priorities. Liberals would howl, but this measure wouldn't be all that controversial if it also closed tax loopholes, reduced corporate welfare and gave companies more incentive to invest in the United States. Even Obama has suggested he'd support a lower corporate tax rate as part of a bigger reform package.

The national debt. Romney supports the "cut, cap and balance" plan  that's become a Republican staple, which would cut government spending, cap it at a fixed percentage of GDP, and require a balanced-budget amendment that would prevent government borrowing in most years. While it sounds simple, it's unlikely that Congress would ever pass such a law, since it would hamstring Congress's spending authority. Plus, a balance-budget amendment would require approval by three-fourths of the states—which tend to benefit from Washington's deficit spending. So Romney's deb-reduction formula is incomplete, at best—especially since he wants to cut taxes without making up for lost revenue elsewhere. At least Romney acknowledges that reducing the debt will be a "long and arduous task."

Social Security. Romney doesn't consider Social Security a "Ponzi scheme," as Rick Perry does, but he'd consider several changes to keep it solvent, such as raising the retirement age and reducing benefits for wealthier enrollees. Those are mainstream ideas that will probably happen eventually. Meanwhile, Romney's against higher taxes to help pay for Social Security.

[See how the debt fiasco damaged the economy.]

Medicare. This is Romney's plan to be named later. Romney generally supports the GOP idea of privatizing Medicare, which would reduce benefits for most recipients in order to stabilize a program that's becoming so expensive it could bankrupt the government. Yet Romney says his plan will "differ" from the prevailing GOP plan championed by Rep. Paul Ryan of Wisconsin. That's it. "Differ." For his part, Obama has also evaded the question of how to fix Medicare, probably because there's no way to do it without a big tax hike or cutbacks that would hit an influential voting bloc.

China. Declaring China a currency manipulator is another "day one" priority for Romney, who said in a recent GOP debate that "if we're not willing to stand up to China, we'll get run over by China, which has been happening for 20 years." But on this issue, Romney's out of step with many of his corporate pals, who dread a trade war with China and whose companies generally profit from the status quo. So it's questionable whether President Romney would be as aggressive on this issue as Candidate Romney.

[See how Perry and Huntsman beat Romney on jobs.]

Obamacare. Romney has pledged to repeal Obama's sweeping healthcare reform plan—which is similar to the one he signed into law in Massachusetts in 2006—while allowing states to devise their own Obama- (or Romney-) style plans. Romney's saying what conservatives want to hear on this issue, but it's worth questioning how ardently he would fight to repeal Obamacare, since repeal would be divisive, distracting, costly and complex. Besides, many powerful groups that backed Obamacare—such as Big Pharma and some insurers—would stand to lose if it were repealed, and they're quietly lobbying to keep it in place.

Regulations. Like his comrades in the corporate-conservative complex, Romney feels that a "vast edifice of regulations" is strangling business, and he'd begin streamlining government rules right away. Romney would dispose of many of the Dodd-Frank reforms that limit risky activities in the financial sector, along with some environmental rules meant to reduce the use of fossil fuels. He'd also set caps on the amount of regulation businesses face and force the government to meet deadlines when doing certain types of regulatory review. While repealing entire laws, such as Dodd-Frank, might prove difficult, other types of reform seem plausible, since even Obama now favors some regulatory relief for businesses.

[See 5 economic problems worth protesting.]

Tort reform. Like many Republicans, Romney wants to rein in medical malpractice lawsuits and other types of litigation that cost companies billions and often drive up prices. But his impact on this issue as president would be limited, since most tort law is promulgated at the state level.

Energy. Romney would allow oil drilling "wherever it can be done safely" and create a fast-track process for approving other types of energy permits. He'd also streamline the process for approving nuclear reactors--including new types of designs--and overhaul current clean-air and clean-water regulations. While some of these ideas might win approval, recent disasters like the Deepwater Horizon explosion in the Gulf of Mexico and the Japanese nuclear meltdown earlier this year bolster the case of opponents. And it could be many years before new drilling complexes create jobs or produce any oil. At least Romney knows better than to promise cheap gasoline--like one of his GOP opponents has been doing--since the economy doesn't always follow the president's orders.

Twitter: @rickjnewman

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