Sapienza on Romney

Romney’s moderate actions as governor and more conservative promises as presidential candidate do not align at all, so it is basically anyone’s guess what he would actually do when elected. Josh Barro of Bloomberg has suggested that Mitt Romney might have a secret plan for the economy. Romney has been down the secret plan road before when running for governor. After election he spearheaded the country’s only plan for universal health coverage of his own initiative, because he saw it as an interesting problem he could solve. Romney may view 2012 economic stagnation in the same way. What if Romney is elected.

Mitt Romney shakes the Etch A Sketch. Having given conservatives everything they had asked for — from switching his positions on abortion and immigration to picking their favorite as his running mate — Romney turned. Knowing deep program cuts are more popular on paper than in practice, and some of the Republican proposals (like a Medicaid block grant structure that sharply cuts federal spending) would run into opposition from Republican state officials, who would fear additional pressure on their own budgets. So to revive the economy, Romney will break his austerity promises and run large budget deficits in the near term including larger-than-desirable military spending. There will be no tax increase so long as there is full Republican control over the federal government. If Democrats control a piece of the government, the eventual expiration of the Bush tax cuts will make it possible to put together a revenue-raising deal while still allowing Republicans to say they never agreed to raise taxes.

When? Whatever his approval rating, Romney will be far more popular than Congress and Congress is likely to be soothed by the return of a Republican president, even when that meant expanding government. Remember, when Romney ran for governor, he said the federal government should spend more on Medicaid. Watch for Republican governors like Chris Christie to become voices against entitlement cuts, backing up Romney in an effort to spend more on defense without cutting elsewhere — and financing the spending with deficits. Christie believes Romney will start telling hard truths if we first elect him president. If he doesn’t actually plan to lead after getting elected, then what was the point?

Where? Obviously, none of GOP fiscal policy is terribly appealing; it’s the same muddling through we could expect in another Obama term, but a big improvement from Romney is likely is on housing policy. The housing crash is exactly the sort of policy problem that should appeal to the Romney of Bain: It’s complicated, he’ll be able to understand it much better than the politicians he’s negotiating with, and the solution involves a restructuring with many parties and Romney getting to play broker. While Romney has been conspicuously silent on housing, his top economic adviser, Glenn Hubbard, advocates an aggressive plan to restructure mortgages. Lower mortgage rates and reduce principal for underwater borrowers, both of which would stimulate the economy.

How? Although a tough sell to Republicans in Congress, they would be much more open to a housing policy under a Republican president than a Democratic one. If VP Paul Ryan makes the pitch won’t Republicans be much more likely to conclude that mortgage bailouts actually are conservative?. And there’s good reason to expect ideological flexibility from Ryan. He’s a team player, and he’ll be working for Romney. Ryan also has been willing to buck conservative orthodoxy in the past for political advantage; backing the Medicare prescription drug benefit, voting for the auto bailouts and even supporting the Davis-Bacon Act, which inflates wages on federally funded construction projects. Mortgage relief could also be coupled with long-term reforms, such as an eventual wind-down of Fannie Mae and Freddie Mac, which would please conservatives. It could be framed as “let’s clean up the mess our predecessors made, at unfortunately significant cost, and then make sure it can never happen again ” making it an easier sell than stimulus spending. It’s rational economic policy, and it’s “democratic” policy.

More? Romney has also made conflicting statements on the dollar. His support for legal immigration has been overshadowed by a furor over those who arrived in the U.S. without authorization. And his vow to “clamp down on cheaters like China” is doubted by Republican luminaries such as former Secretary of State Henry Kissinger. The usual argument is that Romney will be boxed in as an Orthodox conservative, and by Republicans in Congress shifted far to the right. But, Mitt Romney is no ordinary politician having entirely flexible ideological positions and an enormous capacity for pandering. His platform reflects what he thinks will help him get elected, not necessarily what he will do if elected. Romney will have good reason to implement policies that aren’t in his stated platform, even if that means butting heads with Republicans in Congress. That may mean the fiscal adjustment is delayed until after the 2014 or even 2016 election.

If this happens, it would confirm that Romney is the biggest flip flopper in poltical history throwing Republican beliefs (shrinking government until you can drown it in a bathtub) and the TEA party under the bus. Of course, Romney could just acquiesce to the House GOP economic plan and slash and burn through the federal budget, tanking the economy.

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