31st August 2012
Mitt Romney's rocky road to the presidential election hit another obstacle this week after his running mate Paul Ryan received caustic reviews from many in the press corps for his speech at the Republican National Convention.
Most worrying for the campaign these came not only from the usual suspects but also a few surprising sources. Writing for Fox News Sally Kohn characterised the vice presidential nominee's performance as "an apparent attempt to set the world record for the greatest number of blatant lies and misrepresentations slipped into a single political speech". Given its origin, the Republican Party faithful would be forgiven for being somewhat unnerved by the reaction.
Erroneous claims about Obama closing a GM factory (it was closed under the Bush administration) and the suggestion that the President's healthcare plan would see "$716 billion funnelled out of Medicare" (the figure relates to cost savings, not cuts) hardly helped his cause.
Yet, perverse at it may seem, the RomneyRyan ticket is unlikely to be thrown off course by factual inaccuracies or lapses in logic. Instead if there is a the critical flaw it will likely be the growing pile of policy commitments that Romney has so far failed to weave into a cogent platform.
As unemployment remains stubbornly high and with the American economy struggling to maintain a modest rate of growth there is an argument that an "anyone other than the incumbent" approach should be rewarded. Seen in this light policy commitments could act as a barrier to electability since all you would need is to limit the reasons why people would choose not to vote for you rather than having to woo the masses.
However, at a time of economic uncertainty a policy fog risks the Republican team presenting an uninspiring advert to the electorate. Thus far Romney has promised, if elected, to repeal Obamacare, reverse defence cuts and cut taxes. These are to be paid for with as-yet-unidentified efficiency savings in federal outgoings.
Through this he claims to be able to bring spending down to 20% of GDP by the end of his first term, and cap it at that level thereafter.
The elephant in the room (if you'll excuse the pun) is that for all the talk of fiscal conservatism, repealing Obama's hard won healthcare reforms would pose a significant risk to America's long term economic health.
As Ben Bernanke warned in June 2008, six months before Obama's inauguration:
"By any measure, the health-care sector represents a major segment of our economy. Spending on health-care services currently exceeds 15 per cent of the gross domestic product (GDP). Indeed, health-care spending is the single largest component of personal consumption–larger than spending on either housing or food. Importantly, health care also has long been, and continues to be, one of the fastest-growing sectors in the economy: Over the past four decades, this sector has grown, on average, at a rate of about 2-1/2 percentage points faster than the GDP. Should this rate of growth continue, health spending would exceed 22 per cent of GDP by 2020 and reach almost 30 per cent of GDP by 2030."
If it is returned to its previous trajectory under a Romney administration, therefore, federal spending on healthcare alone would breach his 20% cap by the end of his second term.
Unfortunately the odds of a smooth passage of another healthcare reform bill are not in the Republican candidate's favour. After numerous attempts by the Obama administration to build bipartisan support, and despite a general agreement on the pressing need for legislation, the healthcare reform bill had to be passed in Congress without a single Republican vote.
Even after having clambered over these hurdles it narrowly avoided being struck down by the Supreme Court, which voted 5-4 to uphold. As a measure of the opposition it faced Justice Anthony Kennedy described the act as "invalid in its entirety".
This obstructionist agenda may have been designed to paint Obama as weak but it also dug the partisan trenches deeper on both sides. Given that it took the best part of a century to get any reform through the chances of Democrat support for a Romney plan seem disappearingly slight.
It's not over till it's over
A week is a long time in politics – and two months is an age. Obama's position is nowhere near as strong as his supporters would have wanted at the end of his first term.
It remains an uncomfortable truth for the Democrats that no sitting president has been re-elected with unemployment above 8 per cent since World War II. The US unemployment rate was 8.3 per cent in July.
That said polls are not rewarding Romney as conventional wisdom might suggest. Indeed a recent Gallup survey suggests the GOP candidate still has a significant likeability deficit, although he was marginally ahead of the incumbent on economic credibility.
John McCain's experience demonstrated the perils of relying on a vice-presidential pick to lead the charge. Whether Romney will be able to avoid a similar fate will depend on his ability to build a coherent narrative around his campaign both for voters and investors. Getting the facts right would be a good start.
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