Wednesday, May 16, 2012

But Gov. Romney, debt is your thing

Former Mass. Gov. Mitt Romney professes to be really concerned about the rising federal debt. Bloomberg reports
Mitt Romney decried the ballooning federal debt, accusing President Barack Obama of contributing to a mounting deficit he said stifles economic recovery and “threatens what it means to be an American.”

“America counted on President Obama to rescue the economy, tame the deficit and help create jobs,” the presumed Republican presidential nominee told supporters in Des Moines, Iowa, yesterday before winning primaries in Nebraska and Oregon.

Criticizing the $831 billion stimulus enacted shortly into Obama’s term and other administration actions, Romney said the president “bailed out the public sector, gave billions of your dollars to companies of his friends and added almost as much debt to the country as all the prior presidents combined.” As a consequence, “we are now enduring the most tepid recovery in modern history,” Romney said.

Romney’s concerns aren’t being echoed in financial markets, where Treasuries are rallying. Yields on the government’s benchmark 10-year notes fell to 1.77 percent from this year’s high of 2.40 percent almost two months ago, according to Bloomberg Bond Trader data. The yield is 10 basis points, or 0.1 percentage point, above the record low and the rates are about a quarter of the 50-year annual average of 6.49 percent. 
It's hard to take those expressions of concern seriously though when Gov. Romney is also proposing a boatload of tax cuts that would knock at least a half a trillion dollars out of federal revenues.

Stranger still, wasn't piling on debt private citizen Romney's modus operandi at Bain Capital? Jesse Eisinger had a great column on this on the New York Times website back in January.
If Mr. Romney were really running as a private equity executive, how would he view what his campaign regards as one of the nation’s most pressing issues, the national debt?

Right at the top of his campaign’s home page, Mr. Romney proclaims, “We have a moral responsibility not to spend more than we take in.” The United States’ debt is such a problem, it’s like an addiction: “The first step toward recovery is admitting we have a problem and refusing to allow any more irresponsible borrowing,” his site says.

It’s almost as if Mr. Romney never worked in — what’s that other phrase for private equity? — oh yes, a leveraged buyout firm. Leverage as in debt, debt and more debt. Debt amplifies the returns of L.B.O. firms. Indeed, they often saddle companies with extra debt precisely so that their investors can cash out faster, a technique Bain deployed under Mr. Romney’s watch.

Rather than railing against the debt--a matter that neither candidate takes seriously in any case--Gov. Romney should be discussing the ways to use all of the available policy tools, including borrowing, to grow the economy.