The big story in politics this past week was the leak of the Mitt Romney fundraising videotape, in which he seen telling donors that 47 per cent of the population would automatically support Obama because they viewed themselves as victims who deserved free food and healthcare from the government.
What made the comment worse was that he went on to say that they didn’t care about their own lives, and that he couldn’t convince them to see things otherwise.
But while that was a nasty, embarrassing bit for a candidate whose main flaw is that he’s seen as an out-of-touch rich guy, it wasn’t the most revealing moment of the evening.
When the full video was released, something we immediately flagged is the moment where he told supporters that if he were to be elected, the economy would start to improve right away, because there would be a groundswell of confidence, and businesses would start to invest.
As we said then, Mitt Romney is clearly of the belief that a major problem with the economy is just the man who is in the White House right now, and that merely switching that person to a CEO President would improve things.
Matt O’Brien at The Atlantic delved further into this point, slamming Romney’s “faith based economic strategy” and the insinuation that the main problem with the economy is that businesses lack confidence.
But let’s play Devil’s advocate. Maybe uncertainty is driving demand down. The economy is in the doldrums because investment is in the doldrums — it’s possible fear over potential tax increases and Obamacare regulations is keeping businesses from investing. How would we explain that real private fixed nonresidential investment has actually come back a bit, but real private fixed residential investment has not? The simplest explanation isn’t the president, it’s the housing market.
To demonstrate O’Brien’s point, here’s a chart comparing non-residential fixed investment (red line) with residential fixed investment (blue line) going back to 2007. You can see that non-housing investment (which is what businesses engage in) has rebounded quite nicely since Obama took office.
And though it’s true that a lot of businesses grouse about the administration, the fact of the matter is that if you ask them what their biggest problem is, they don’t say “uncertainty.” They say the problem is lack of demand.
This chart comes from the NFIB Small Business Outlook Survey, and it shows that the per cent of businesses saying that lack of sales is their biggest problem is what really spiked during this crisis. Taxes are cited as a major problem, but they always are in every environment, so that’s nothing new.
It is a fact that complaints about regulation are creeping up (per another chart from the same survey) but for the vast majority of this President’s term, it’s an issue that’s been far below sales.
Other measures confirm that private investment spending is not the problem.
Private spending on equipment and software is near all-time highs.
Mark Perry, an economist affiliated with the conservative American Enterprise Institute recently noted that private GDP was in fact doing “fine” and growing along with historical averages. It’s the public sector drag that makes this recovery uniquely poor.
Mitt Romney’s comment about how the economy would improve merely based on his election reveal a few big insights about him and his campaign.
It explains the lack of detail in his policies. If even in private conversations he feels comfortable saying that his mere election would improve the economy, then of course he’s not going to give hard details in his public statements.
It also reveals that Romney’s 2012 campaign is the same as Obama’s 2008 campaign. Obama thought his mere election would improve our relationship with the Muslim world and help stem global warming. Romney thinks the same thing about the economy. No details necessary.
And finally it reveals that Romney doesn’t have any coherent explanation of the economic morass that’s led to 8.1 per cent unemployment.
Economists will say that it’s the result of deleveraging, housing, the state and local bust etc. Both this comment and the 47 per cent comment imply that Romney thinks it’s about attitude, and that he’s the man to change minds and get it all going again.
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