Mitt Romney and America’s Four Deficits

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The United  States is besetby four deficits: a fiscal deficit, a jobs deficit, a deficit in publicinvestment, and an opportunity deficit. The budget proposals put forward bypresidential candidate Mitt Romney and his running mate, Paul Ryan, couldreduce the fiscal deficit, but would exacerbatethe other three.
To be sure, Romney and Ryan have failed to providespecifics about how they would reduce the fiscal deficit, relying on “trust me”assertions. But the overarching direction oftheir proposals is clear: more tax cuts, disproportionately benefiting those atthe top, coupled with significantly lower non-defense discretionaryspending, disproportionately hurting everybody else – and weakening theeconomy’s growth prospects.
Despite 30 months of private-sector job growth, the USstill confronts a large jobs deficit. The unemployment rate remains more thantwo percentage points above the “normal” rate (when the economy is operatingnear capacity). Moreover, the labor-force participation rate remains nearhistoric lows.
More than 11 million additional jobs are needed to returnthe USto its pre-recession employment level. At the current pace of recovery, that ismore than eight years away. In the meantime, persistenthigh unemployment reduces the economy’s growth potential by robbing today’sworkers of skills and experience.
When weak aggregate demand causes the economy to operatefar below its potential, cuts in government spending enlarge the jobs deficit.Indeed, in his recent speech in Jackson  Hole, Wyoming, US FederalReserve Chairman Ben Bernanke warned that such cuts significantly inhibit jobcreation.
Without revealing which programs he would reduce, Romneypromises to slash federal spending by morethan $500 billion in 2016, capping it at 20% of GDP thereafter. He alsopromises an immediate 5% cut in non-defense discretionary spending in 2013, on top of the huge cuts already scheduled to takeeffect. And he has ruled out additionaltemporary fiscal measures aimed at job creation, like President Barack Obama’sproposals for additional grants to states and additional infrastructurespending.
Romney acknowledges that large spending cuts, along withthe scheduled expiration of tax cuts at theend of this year, could throw the economy back into recession in 2013. But hevows to steer the economy from the fiscal cliff by extending the tax cutsenacted under George W. Bush, doubling down with a further 20% across-the-board cut in income-tax rates andcutting the corporate rate from 35% to 25%.
With the possible exception of the extension of theBush-era tax cuts, these changes would take considerable time to implement. Even when enacted, their near-termeffects on job creation would be minimal. An across-the-board reduction in taxrates performs poorly in terms of budgetary effectiveness (the number of jobscreated per dollar of foregone revenue).Payroll-tax relief and spending on programs like food stamps and unemploymentcompensation are much more effective.
Romney overstates his tax proposals’ long-term growtheffects as well. Reducing individual tax rates and taxes on savings andinvestment at best fosters modest increases in employment, work effort, andincome. Despite the Bush-era tax cuts, the 2001-2007 expansion was the worst ofthe post-war period in terms of investment, employment, wage, and GDP growth.Job creation and growth were much stronger following President Bill Clinton’stax increases in the 1990’s.
Moreover, if all of Romney’s additional tax cuts were financedin a revenue-neutral way, as he promises, only the compositionof taxes would change; the overall tax share of GDP would not. There is noevidence that this would significantly boost growth, as Romney claims.
Based on what Romney has told us, we can conclude that hisplan would exacerbate the public-investment deficit as well. Romney’s vow tocap federal spending at 20% of GDP by 2016, while maintaining defense spendingat 4% of GDP and leaving both Social Security and Medicare unchanged for those55 or older, implies exempting more than 50%of government spending from cuts for the next decade. So, to hit the 20% cap,spending on everything else would have to be slashed by an average of roughly40% by 2016 and 57% by 2022.
Everything else includes government investments in threemajor areas on which growth and high-wage jobs depend: education,infrastructure, and research. These areas account for less than 8% offederal spending, and their share has been declining steadily. Under Romney, itwould plummet to new lows.
Everything else also includes spending on programs thathelp low-income families, like food stamps, student grants, and Medicaid. The Center on Budget and PolicyPriorities finds that almost two-thirds of the Ryan budget’s spending cutswould come from such programs. Romney offers few specifics, but simple arithmetic shows that his plan would require evendeeper cuts in these programs than Ryan’s plan would.
Meanwhile, Romney’s plan would actually increase taxes onmiddle-income families. His plan would pay for lower income-tax rates byeliminating tax deductions like those for charitable giving and mortgages,while maintaining tax preferences for saving and investment. But there are not enoughtax breaks for the rich to cover another 20% reduction in their income-taxrate. That is why the nonpartisan Tax Policy Centerfound that Romney’s plan would cut overall taxes for households with incomesabove $200,000, but would require an average annual tax increase of at least$2,000 for households with incomes between $100,000 and $200,000.
Romney’s budget plan would also make the federaltax-and-transfer system considerably less progressive, thereby worsening incomeinequality, which is already at its highest level since the Great Depression.Rising income inequality fuels a growing opportunity deficit for children borninto poor and middle-income families, reflected in disparities in educationalattainment by family background, and a decline in intergenerational mobility.Under Romney, the opportunity deficit would widen, robbing the country offuture talent and productivity.
Romney has provided few details about his deficit-reductionplan. But, based on what he has revealed, we know that it would increase thejobs deficit, the investment deficit, and the opportunity deficit, withnegative consequences for future growth and prosperity.

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关键词：DEFICITS America Deficit Romney Erica direction running forward relying budget

The United Statesis beset by four deficits: a fiscal deficit,a jobs deficit, a deficit in public investment, and an opportunity deficit.The budget proposals put forward by presidential candidateMitt Romney and his running mate, Paul Ryan, could reduce the fiscal deficit,but would exacerbate the other three. Romney promises to slash federal spending by more than $500 billionin 2016, capping it at 20% of GDP thereafter. He also promises an immediate 5%cut in non-defense discretionary spending in 2013,on top of the huge cuts already scheduled to take effect. And he has ruled out additional temporary fiscal measuresaimed at job creation(Romney' proposals)
More than 11 million additional jobs are needed to return the US to itspre-recession employment level. At the current pace of recovery, that is morethan eight years away.When weak aggregate demand causes the economy to operate far below itspotential, cuts in government spending enlarge the jobs deficit.( jobs deficit)
Romney overstates his tax proposals’ long-term growth effects.Reducing individual tax rates and taxes on savings and investment atbest fosters modest increases in employment, work effort, and income.Moreover, if all of Romney’s additional tax cuts were financed in arevenue-neutral way, as he promises, only the compositionof taxes would change; the overall tax share of GDP would not. There is noevidence that this would significantly boost growth, as Romney claims.(growth deficit=jobs deficits)

Based on what Romney has told us, we can conclude that hisplan would exacerbate the public-investment deficit as well. Romney’s vow tocap federal spending at 20% of GDP by 2016, while maintaining defense spendingat 4% of GDP and leaving both Social Security and Medicare unchanged for those55 or older, implies exempting more than 50%of government spending from cuts for the next decade. So, to hit the 20% cap,spending on everything else would have to be slashed by an average of roughly40% by 2016 and 57% by 2022.(a deficit in public investment)
Everything else includes government investments in three major areas onwhich growth and high-wage jobs depend: education,infrastructure, and research.Everything else also includes spending on programs that help low-incomefamilies, like food stamps, student grants, and Medicaid. Meanwhile, Romney’s plan would actually increase taxes on middle-incomefamilies.Romney’s budget plan would also make the federal tax-and-transfer systemconsiderably less progressive, thereby worsening income inequality( an opportunity deficit)

Romney is a dead horse after his recently 47% comments.