Aug. 31 (Bloomberg) -- Republicans used their national convention to promise a return to prosperity, asking Americans to trust that decisive leadership and a small-government vision would reverse a national decline.
Speakers in Tampa, Florida, including presidential nominee Mitt Romney, blamed an underperforming economy on an underachieving president. While several, including New Jersey Governor Chris Christie, referred to the “hard choices” and pain necessary to rein in the federal deficit, they offered few details about the sacrifices required.
“What is needed in our country today is not complicated or profound,” Romney said last night in accepting the nomination. “It doesn’t take a special government commission to tell us what America needs,” he said. “What America needs is jobs. Lots of jobs.”
In diagnosing the nation’s economic ills, the Republicans hit upon familiar villains -- runaway spending, oppressive regulation and excessive taxation -- and offered familiar remedies. To replace President Barack Obama’s “hope and change” credo of 2008, they reprised the small-government theme President Ronald Reagan rode to victory in 1980.
“The choice is whether to put hard limits on economic growth, or hard limits on the size of government, and we choose to limit government,” said Representative Paul Ryan when he accepted the nomination to run for vice president.
Accepting the party’s nomination, Romney promised more jobs and lower taxes. He unveiled a five-point plan he said would create 12 million jobs. He would cut income-tax rates by 20 percent while eliminating the estate tax and alternative minimum tax. The resulting revenue loss would be made up by eliminating various tax breaks, which he has refused to specify.
At a Bloomberg panel discussion, Lanhee Chen, Romney’s policy director, said the candidate would consider a proposal by economist Martin Feldstein of Harvard University to cap high-income taxpayers’ individual deductions. Yet Chen brushed aside demands for Romney to disclose more details about his plans.
“You know, we can talk about specific provisions. We can talk about the write-off for interest on municipal bonds. We can talk about X, Y, Z,” he said. “But that is a process that will require the president to lead.”
Party leaders spoke of an incumbent whose policies hadn’t resolved the economic crisis he inherited and had spawned fresh problems: crony capitalism, encroachments upon individual liberty and a crippling debt that threatened the country’s pre-eminence.
“The world knows that when a nation loses control of its finances, it eventually loses control of its destiny,” said former Secretary of State Condoleezza Rice.
With Obama likely to win a majority of black and Hispanic votes, a key audience for Republicans this week was the white working-class voters who have been an essential part of Republican electoral coalitions for four decades. Four years ago, such voters -- “the working men and women of this country” in Ryan’s words -- backed Republican candidate John McCain of Arizona over Obama by a margin of 58 percent to 40 percent.
These voters, who made up 39 percent of the electorate in 2008, have been disproportionately hurt by the financial crisis and anemic recovery.
Between 2007 and 2010, working-class individuals -- those in nonprofessional occupations who lack college degrees -- saw their median earnings fall 4.6 percent, according to a study of U.S. Census data prepared for Bloomberg News by Sentier Research of Annapolis, Maryland. Over that period, earnings for college-educated professionals or managers rose 1.9 percent.
Working-class males were especially hard hit, with median annual earnings falling 6.6 percent, more than three times the 1.9 percent loss suffered by all employees, the study found.
Christie, who gave the keynote address, sought to align the party with blue-collar Americans.
Said Christie: “We are the great-grandchildren of men and women who broke their backs in the name of American ingenuity; the grandchildren of the greatest generation; the sons and daughters of immigrants; the brothers and sisters of everyday heroes; the neighbors of entrepreneurs and firefighters, teachers and farmers, veterans and factory workers.”
The Republicans’ gloomy economic assessment ignores indications that a slow expansion is continuing.
Earlier this week, the Commerce Department revised upward its estimate of second-quarter growth to 1.7 percent from an initial 1.5 percent. The economy is likely to grow at an annual rate of 1.8 percent in the third quarter and 2.1 percent in the fourth, according to 75 economists surveyed by Bloomberg.
The Standard & Poor’s 500 Stock Index has risen 11.3 percent this year and has more than doubled since its March 2009 nadir. Corporate profits reached $1.9 trillion in the second quarter, more than 15 percent higher than the pre-crisis peak in 2006.
There was little mention this week that the housing market, the source of the economy’s weakness, shows signs of strengthening. In July, new home construction hit an annual rate of 746,000 homes, up from 478,000 in April 2009, amid the collapse of the housing bubble.
There are plenty of reasons to be concerned about the economy. With Europe near recession and China slowing, the U.S. remains vulnerable. The Congressional Budget Office warned of a renewed recession next year if lawmakers can’t agree on a deal to avoid what is known as the fiscal cliff, a package of automatic tax increases and spending cuts scheduled to take effect in January.
“By any number of measures, the strength of the recovery has been and remains disappointing,” Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta, said in an Aug. 21 speech. “Our current expansion is not on the track we would wish.”
Republicans hammered at the jobs crisis, which shows no sign of ending. The economy this year has produced a monthly average of 160,570 private sector jobs -- less than half the 343,000 created during the same period in Reagan’s presidency.
The unemployment rate in July was 8.3 percent and has topped 8 percent since February 2009. It may remain as high as 7.7 percent in late 2014, according to the Federal Reserve’s latest projections.
“To the majority of Americans who now believe that the future will not be better than the past, I can guarantee you this: If Barack Obama is re-elected, you will be right,” Romney said last night.
High above the convention floor, a set of spinning dials underscored another Republican preoccupation. Throughout the convention, the “national debt clock” showed a continually updated tally of the nation’s roughly $16 trillion in red ink.
For the fiscal year that ends Sept. 30, the federal government is projected to run a $1.1 trillion deficit, according to the Congressional Budget Office. That marks the fourth consecutive year of 13-figure shortfalls. “His trillion dollar deficits will slow our economy, restrain employment, and cause wages to stall,” Romney said last night.
Republican deficit concerns aren’t shared by investors. The yield on 10-year Treasury notes fell to 1.63 percent from 2.56 on Aug. 5, 2011, when Standard & Poor’s lowered the U.S. credit rating, as investors fled European government debt for the perceived safety of U.S. government securities.
The 10-year Treasury’s current yield is more than 3 percentage points below the 4.67 percent average for the 10 years that preceded Obama’s inauguration.
Republicans sought to turn their plans to cut spending for entitlement programs into an electoral plus with another demographic group that in recent elections has supported the party, the elderly. In 2008, voters 65 and older backed McCain over Obama by 53 percent to 45 percent, the only age group that the Republican candidate won.
Ryan said “the biggest, coldest power play of all in Obamacare came at the expense of the elderly” and that the administration had “funneled” $716 billion out of Medicare, the health-insurance system for the elderly, to pay for the 2010 health law that extends coverage to most Americans.
According to the nonpartisan Concord Coalition, there are no cuts to seniors’ Medicare benefits as part of Obama’s health-care law, the 2010 Patient Protection and Affordable Care Act. The plan scales back payments to providers of Medicare Advantage plans, an alternative to Medicare that uses private insurers. It also slows the growth of Medicare payments to hospitals and other health providers.
Republicans are assuming that Medicare Advantage providers will respond to the reduced government payments by trimming senior benefits. They also assume the same savings in their House-sponsored budget plan crafted by Ryan. The health-care law backed by Obama plows the projected savings back into subsidies to help low-income individuals buy insurance, while Ryan’s plan counts the money toward debt reduction.
Ryan also said a Romney-Ryan administration will “protect and strengthen Medicare, for my mom’s generation, for my generation, and for my kids and yours.”
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