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% of the
population would automatically support Obama because they viewed
themselves as victims who deserved free food and healthcare from the
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 who's
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 right away start to improve right away, because there
would be a groundswell of confidence, and businesses would start to
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
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 of 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 % 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
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 lead to 8.1% unemployment.
Economists will say that it's the result of deleveraging, housing,
the state and local bust etc. Both this comment and the 47% comment
imply that Romney thinks it's about attitude, and that he's the man to
change minds and get it all going again.