Earlier this week the Romney campaign released a paper by four economists as a response to the constant criticism over their proposed economic policies and arguments in their campaign ads. Romney has been trying to stack the deck against Obama by calling him out on the slow recession recovery, but in their haste to paint Obama as the ne’er-do-well food stamp president, they forgot how to cite their sources: instead of quoting what the sources actually said, they created artificial context and, basically, made-up what they wanted them to say.
The economists in the paper outline three points with seemingly supportive analysis:
- The recovery has been terribly slow, even when compared to past recoveries
- The Obama Administration should not have relied on the stimulus
- Romney’s plan for the economy would produce a country with boosted revenues and lower unemployment.
But when Ezra Klein from the Washington Post contacted a few of the economists to ask whether Romney was interpreting their research correctly or not, they said that the Romney campaign knows little of their work or policy proposals.
If This Were a Normal Recovery, “We’d Be Recovered Already”
According to the aforementioned economists, “[America's] economy usually recovers quickly from recessions, and the more severe the recession, the faster the subsequent catch-up growth.” Their arguments are based off of a paper called “Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record,” by Michael Bordo and Joseph Haubrich. Klein had contacted Bordo to see if he agreed with the Romney economists that the recovery was inordinately sluggish and whether a different set of policies (i.e., not Obama’s) would have made a difference at all.
Bordo didn’t point the finger right at government policy. “We found that a lot of the difference between what would’ve been predicted by the normal behavior of recessions and what we observed now is explained by the collapse of residential investment,” he said. “Put another way, if residential investment were what it was in a normal recovery, we would have recovered already.”
In a nutshell, economic recovery is always nearly stagnated when a recession is associated with a housing bust, which is what happened in 2008. Bordo’s analysis, which is consistent with the rest of the literature on the topic, contrasts the Romney campaign’s interpretation of his paper when they said that this recovery should have been faster and that somehow Obama’s policies are to blame.
Out of all of the literature they cite, however, most conclude that the stimulus had a positive effect. The Romney campaign quoted 2 out of 15 references to present their argument. One was by economists who were already associated with the Romney campaign, and the other was Sufi & Mian’s analysis of the Cash for Clunkers program.
Klein talked to Sufi and learned that the analysis had nothing to do with the stimulus or economic recovery, the two things that the Romney campaign used it to support. When asked about his thoughts on stimulus programs during a recession, Sufi agreed with most other economists: “Most of the research is pretty positive on stimulus.”
Of the Romney campaigns allegations that the recovery was unusually slow because of Obama’s policies, Sufi said, “I strongly believe the evidence shows these private debt overhands are always longer, the recoveries always slower.”
Romney Misrepresents His Own Tax Plan
After using false information to present a case against Obama and his policies during the recession, the Romney campaign has started to defend their obfuscated hints at a tax-reform that will fix everything. “The Romney tax reform plan will increase GDP growth by between 0.5 percent and 1 percent per year over the next decade,” their economists write.
Klein had dug deeper into what references the Romney campaign was citing in order to come up with these figures, eventually talking directly with one of the authors of a paper that was being cited. The author, Berkeley economist Alan Auerbach, admitted that his numbers were the result of a simulation in which he replaced the income tax with a consumption tax.
Obviously if the Romney campaign said that they would abolish income tax and replace it with consumption tax then everyone would be talking about it. But they’re not. And they didn’t.
Klein basically discovered three different economists from three different specialties who all agreed that the Romney campaign misinterpreted their work and twisted their research in order to fit their agenda. And that means that the Romney campaign is, according to economists, completely wrong about the current administration’s role in the struggling economy.
Romney himself has flip-flopped on his position on the housing market already, which isn’t really a surprise. At first he said that he wanted the foreclosure process to “run its course and hit the bottom,” then later admitted that “the idea that somehow this is going to cure itself by itself is probably not real” and that “there’s going to have to be a much more concerted effort to work with the lending institutions to help them take action, which is in their best interest and the best interest of the homeowners.” I would ;ink you to where the Romney campaign’s policy is regarding this process of fixing the housing market problems, but that would be impossible because they don’t have a formal policy to resolve these important issues.
Klein continues to highlight the contradictory nature of Romneyomics, even when it contradicts itself:
Meanwhile, Auerbach added another interesting wrinkle to his analysis. “Our paper didn’t take into account business-cycle considerations,” he said. “To the extent that the Romney plan spurs a more rapid economic recovery from our current state of high unemployment, that could make a big difference in short-run growth estimates. These would basically be demand-side stimulus effects.” In other words, insofar as Romney’s tax cuts act as a Keynesian stimulus package, they could do more for the economy in the short-run than standard tax models would assume. But that requires assuming that Keynesian stimulus works, which would contradict the first section of the Romney campaign’s paper.
So even the studies that the Romney campaign’s economists handpicked to bolster their case don’t prove what the Romney campaign says they prove. And some of the key policy recommendations that flow from those studies are anathema to the Romney campaign. And in perhaps the key policy area highlighted by these studies, the Romney campaign doesn’t have a formal policy. If this is the best they can do in support of their economic plan, well, it’s not likely to quiet the critics.
The Romney campaign has used two sources to reference their attack against Obama’s policies and relate them to the slow recovery, one by an economist already associated with the campaign and another that had nothing to do with the recession at all. Additionally, any hope that their economic plans will work relies solely on the fact that their attacks on Obama are false.
While it’s no surprise that the Romney campaign is using Exaggerated Truth Claims (ETC) in order to sell themselves, if the recession continues to take a toll on the middle class we may see more and more voters siding with Romney purely out of frustration with the current government leadership.