There’s basically one big question hanging over the 2012 campaign: If he wins and takes over a country with a large budget deficit and high unemployment, will Mitt Romney actually attempt to slash spending and close loopholes aggressively enough to pay for his huge reductions in tax rates?
History says he won’t. Ronald Reagan didn’t pay for his tax cuts, George W. Bush didn’t pay for his tax cuts, and early in the Obama administration the vast majority of congressional Republicans got behind Jim DeMint’s plan for a giant deficit-increasing tax cut.
Economics says he shouldn’t. Slashing federal outlays and rescinding tax expenditures at a time of low interest rates and a large output gap would kneecap the economy.
But history also says that newly elected presidents usually try to implement the agenda they campaigned on. They’re often stymied by Congress, but in this case we know the votes are there in the House to pass the Paul Ryan budget. They already took the vote! And it’s extremely likely that if Romney wins, the GOP will also have a majority in the Senate. There’s not much precedent for a party running on an agenda, winning the election, and then just abandoning it. There’s no particularly good reason to have spent all this time talking about spending cuts unless Republicans really want to cut spending. But at the same time, all their talk seems very calculated to avoid specifics as if they don’t really want to do the cuts.
The result: It’s all a bit of a mystery. A Romney administration will either spend 2013 enacting a gigantic increase in the budget deficit, or else major cuts in domestic spending. In economic terms, there’s a big different between those policies. And since both campaigns have decided it’s in their interest to say the cuts version is what’s going to happen, we’re not going to have a debate about what’s likely to actually happen. But that’s what I’d like to know.