Mitt Romney’s economic plan proceeds from a flawed premise: that the federal budget can be put on a sustainable footing and the country returned to solid, shared prosperity without new tax revenue. At bottom, the Republican presidential candidate envisions a smaller, less active federal government than we think is desirable. Mr. Romney gives more credence than we do to the ability of tax cuts to promote economic growth; simultaneously, he overestimates the impact of what he describes as “the vast expansion of costly and cumbersome regulation of sectors of the economy, ranging from energy to finance to health care.”
On the tax front, Mr. Romney would lower corporate tax rates from 35 percent to 25 percent — a move that would be fine if it were paired with eliminating loopholes and broadening the corporate tax base, keeping it, at worst, revenue-neutral rather than further starving an already-depleted treasury. He would worsen matters by eliminating the estate tax; getting rid of taxes on interest, capital gains and dividends for those earning less than $200,000 a year; and — most expensive — keeping in place all the Bush tax cuts, which the former Massachusetts governor describes as “a directional marker on the road to more fundamental reform.”
Mr. Romney breezily vows to cap spending at 20 percent of gross domestic product, but he ducks the hard choices embedded in that pledge, which he would buttress with the bad idea of a constitutional balanced-budget amendment. Specifically, he fails to explain how he would address Medicare, the greatest budgetary challenge in the coming decades.
At the same time, Mr. Romney’s plan is more responsible than those of some fellow Republican candidates.
Some of Mr. Romney’s immediate agenda is sensible. Passing the pending free-trade agreements with Panama, Colombia and South Korea is something that ought to be accomplished before the 2012 election.