2012 Republican hopeful Mitt Romney is banking on his economic credentials as a former businessman to bolster his presidential prospects. “I believe it’s time for someone who’s had a job do the job of getting jobs for the American people,” Romney said over the weekend.
However, Romney’s supposed business acumen doesn’t come through when it comes to discussing the federal budget. Romney has decided, like so many other conservatives from both sides of the aisle, to hang his hat on a federal spending cap in order to balance the budget. As he said in his announcement speech last week:
I will cap federal spending at 20 percent or less of the GDP and finally, finally balance the budget.
But Romney the businessman should know that attempting to balance the budget without paying attention to both sides of the federal ledger — spending and revenue — doesn’t work. After all, when he was working on business, would he have tried to budget without taking into account how much money his business was bringing in?
Romney’s proposal is similar to the CAP act proposed by Sens. Bob Corker (R-TN) and Claire McCaskill (D-MO), which would cap federal expenditures at 20.6 percent of GDP. As I pointed out here, even if a cap were strictly adhered to, the deficit could still be huge, depending on how much revenue the government brings in. After all, capping spending at 20 percent of GDP wouldn’t come close to balancing the budget if revenue were consistently 16 percent of GDP.
Calling for a spending cap also makes it so Romney doesn’t have to name any actual cuts that he would make to the budget. But a cap of the sort Romney desires would likely force the government into approving hundreds of millions of dollars of cuts in Social Security and Medicare. As the Center on Budget and Policy Priorities pointed out, such a cap would also make recessions worse, by forcing the government to cut during a downturn, reinforcing the downward spiral.
By ignoring revenue — which is at a 60 year low — Romney is proving that he doesn’t really care about the deficit. He just cares about getting government spending down to an arbitrary level, whether or not doing so is good for the economy, prevents the government from making important investments, or results in a balanced budget.