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Home Publications Blogs Beat the Press Ross Douthat Tries His Hand as a Romney Speech Writer

Ross Douthat Tries His Hand as a Romney Speech Writer

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Wednesday, 03 October 2012 04:10

Ross Douthat is the third columnist this week who is trying his hand as a Romney speechwriter following on an effort by Robert Samuelson on Monday, and David Brooks on Tuesday. Let's see what he's got.

Douthat has a plan for what Romney should "tell the 47 percent." He begins by noting that Romney is at best even with President Obama among white working class voters outside of the South. He tells readers that Romney is even losing some voters who are convinced that Obama is really Kenyan. The problem is that they think Romney is for the rich. Anyhow, Douthat has some plans to convince the 47 percent otherwise.

His begins by mentioning two items that it would be great to see any politician champion. The first is a plan by Glenn Hubbard, one of Romney's top economic advisers, to allow underwater homeowners to refinance at low interest rates. While President Obama has already embraced part of this package (all underwater homeowners with loans guaranteed by Fannie Mae and Freddie Mac can now refinance their loans), there are other parts that could still profitably be pursued. 

Hubbard's proposal calls for eliminating excess costs in the financing process that increase the gap between the rates paid by borrowers and the interest received by lenders. These are all the fees that go to mortgage brokers, title insurers, closing lawyers. There are tens of billions of dollars wasted every year on these middle people who contribute virtually nothing or nothing to the process. If Romney, Obama, or anyone else can push through measures that would reduce these costs, that would be great policy.

The other item on the table is breaking up too big to fail banks, a policy recently trumpeted by that well know socialist, George Will. True believers in markets don't want the government to subsidize banks with an implicit guarantee. This is just a handout, but most politicians from both parties have been happy to use taxpayers dollars for this purpose. (Question for Romney: are the subsidizedWall Street bankers part of the 47 percent?)

Okay, but let's get to the speech. The first item is to assure the 47 percent that Romney would not raise their taxes:

"Whatever shape tax reform ultimately takes, under my administration, no middle or working class American will pay a penny more in taxes than they do today. Not a penny more. And to prove that I’m serious about protecting working families, tonight I’m calling for a four-year extension of the payroll tax cut, so that Americans don’t have to worry about seeing their tax bills go up an average of $1000 when the cut expires next year."

This is interesting. If we cut taxes for the wealthy and we don't take back deductions and we also extend the payroll tax cut then we are talking about considerably larger deficits. That's okay by me, but I believe in arithmetic. The Washington pundit/policy types who worship at the alter of balanced budgets and don't care about the arithmetic of GDP accounting (in the current economy, lower deficits will mean less demand, less growth, and therefore higher unemployment) would likely be very upset by Douthat's plan to have Romney push for higher deficits. It might also be hard to reconcile Romney's call for trillion dollar plus annual deficits with all of those ads yelling about President Obama's huge deficits.

Okay, let's move on the health care:

"We’re going to repeal Obamacare: It taxes too much, cuts Medicare too deeply, pours more money into a broken system and piles on regulations that will keep driving costs up and up and up. But tonight I want to speak to Americans who don’t have health insurance, or struggle to pay for it, and make this pledge: Under my administration, you will not be forgotten. I promise to create a tax credit, worth thousands of dollars, to help people who don’t get insurance through their employers. I promise to expand high-risk pools where people with pre-existing conditions could get coverage more cheaply than they do today. When I was governor of Massachusetts, we cut the number of uninsured by more than half. Tonight, I’m setting the same goal as president – and we don’t need a government takeover of health care to do it."

Hmmm, this one could be a bit of a problem. Douthat wants Romney to announce the end of Obamacare as a wasteful boondoggle and then boast about how he cut the number of uninsured in Massachusetts by more than half. Of course the way that Romney reduced the number of uninsured in Massachusetts by more than half was by implementing Obamacare. As M.I.T economist Jonthan Gruber, who advised both Romney and Obama, has commented, it's the same damn plan. But hey, we're just talking about getting this one by the Washington press corps. Douthat could be right, Romney might be able to pull it off.

Then we have the Romney plan for Medicare:

"But first, by asking wealthy Americans – the Warren Buffetts and Bill Gateses and others like them — to put a little more money toward their medical care, so that everyone else’s costs don’t have to rise. And second, by getting insurers to bid against one another to drive the cost of Medicare down, so that you can get the same benefits at a lower price. Let me be clear: If my plan doesn’t work, the government will be on the hook, not seniors. Nobody, I repeat nobody, will be left without coverage. But I believe that it will work – and doing nothing, as the president prefers, is simply not an option."

Okay the wealthy Americans line is cute, but in reality we can snap our fingers and nix benefits for the Warren Buffets and the Bill Gateses and we will be left with the exact same problem. We won't have to change any numbers in our projections since they are usually rounded to the closest billion and the few million dollars we will save from this brilliant plan probably won't even affect the rounding. Unless we think that people who earn $40,000 a year are like the Warren Buffetts and Bill Gateses, we won't get enough from this sort of means testing to make it worth bothering with. Oh yeah, these people also paid for their benefits, but whose counting?

Then we have the second part, we're going to have private "insurers bid against one another to drive the cost of Medicare down." What a great idea! This is kind of like what we did in the 90s with Medicare Plus Choice, courtesy of the Gingrich Congress. Then we had Medicare Advantage, brought to you by President George W. Bush. Both of these experiments led to higher costs, not lower costs. And we have the huge private insurance market for the non-Medicare population which doesn't work very well. But hey, let's keep trying the same experiment, it may work one of these days.

Anyhow, that's Douthat's pitch as a Romney speechwriter. Does he get the job? 

Comments (10)Add Comment
Whatever Happened to Straightforward Questions of Accountability?
written by Last Mover, October 03, 2012 7:09
http://robertreich.org/post/32769517776

Or Douthat, Brooks and Samuelson could have suggested a few straightforward questions like those above by Robert Reich designed to hold candidates accountable for their own claims. Of course that's too much to ask from pundits full of their own mangled wanna be speeches. It looks too much like investigative reporting which is off limits for presidential candidates.

For example by Reich:

Governor Romney: You’ve said that you have used every legal method to reduce your tax liability. You’ve also said that as president you would close tax loopholes in order to help finance a major across-the-board tax cut. What specific tax loopholes have you used that you would close? A followup: Would you close the loophole that allows private-equity managers to treat their income as capital gains, subject to a 15 percent tax, even when they risk no capital of their own?
Real Housing Reform
written by Robert Salzberg, October 03, 2012 8:23
If you add up the revenue lost each year from the mortgage deduction, the deduction for state and local property taxes and the capital gains deduction for selling your primary home, it costs around 200 billion dollars a year.

With the 30 year mortgage rate hovering around 4%, the mortgage interest deduction has a net effect of lowering the real cost of the mortgage by around 1%.

Through Fannie and Freddie, America owns or backs about half of all mortgages in America. Since the Great Recession began, Fannie and Freddie have also been backing the vast majority of new loans. We also provide big subsidies to all banks.

Like the Student Loan Reform, we should cut out the middleman, ie the banks. We could back all conforming home loans through the Federal Reserve at whatever interest rate the Federal Reserve can get and eliminate the mortgage interest deduction and the capital gains exemption for selling your primary home.

...
written by JSeydl, October 03, 2012 8:45
If the competition is between Samuelson, Brooks, and Douthat, then, yes, Douthat gets the job.
Inequality 101 - Helping the Rich get Richer
written by Ron Alley, October 03, 2012 8:48
A suggested question that a moderator might put to Mr. Douthat's candidate Romney:

Mr. Romney, you have used tax planning and tax avoidance with great success in your work at Bain Capital and in your personal finances, do you deny that your tax plan will make the rich even richer by lowering their tax bills while leaving the middle class paying the same taxes they are now paying? And, won't your tax plan create even more economic inequality?

The camera pans to the ballot box.
Housing and demand
written by David, October 03, 2012 9:57
Robert, cool idea, but bankers are ok with low demand only in sectors other than their own. Remember those Senators kissing Dimon's keisters.
...
written by PeonInChief, October 03, 2012 11:29
Hmm. I've been busily computing our taxes once my husband retires, and I had to figure out how much of his Social Security would be subject to income tax. The most interesting fact is that 2/3 of recipients owe no tax on their SS because they don't have enough additional income. That means they have income of $25K (individual) or $32K (couples). Unless we're going to charge elders more once they have about $500 a month more than their SS, it's not worth the time to do the computations.
...
written by Steve Hamlin, October 03, 2012 11:54
"excess costs in the financing process...are all the fees that go to mortgage brokers, title insurers, closing lawyers...wasted every year on these middle people who contribute virtually nothing or nothing to the process."

Dean - love your blog and the great work you do.

Real property laws are almost all state-level law. Try to satisfy and re-record a new mortgage without an updated title search - it will not happen without changing 50 sets of state real property lien law, or dealing with a mortgage lender that does not care about mortgage lien priority, which do not exist.

The Feds cannot cram mortgage law changes down - it is state law.

And BTW - the fact you think title insurers add virtually nothing to the process means you have no idea how real property transacts, or how deeds, mortgages, and liens work in the real world. At all. (sorry to have to say that).
...
written by Aaron, October 03, 2012 3:40
Hubbard's proposal calls for eliminating excess costs in the financing process that increase the gap between the rates paid by borrowers and the interest received by lenders.

I tried to find something that articulated Hubbard's plan. The best I could do was this - which suggests that Hubbard doesn't propose to reform the system or increase its efficiency, but instead proposes that the taxpayer pick up the tab for closing costs for mortgages covered by the program.
There are tens of billions of dollars wasted every year on these middle people who contribute virtually nothing or nothing to the process.

Very true, and the affected parties have lobbied long and hard to keep it that way. As Steve Hamlin points out, these issues fall largely under state law, which may explain why rather than proposing a reform that would benefit all home buyers, Hubbard appears to simply be saying, "We'll cover all of that with a federal subsidy."

Steve Hamlin writes,
And BTW - the fact you think title insurers add virtually nothing to the process means you have no idea how real property transacts, or how deeds, mortgages, and liens work in the real world. At all. (sorry to have to say that).

I think it's fair to observe that under a more sensible, modern and efficient system of titling and transferring land, although some of those costs would remain necessary, they could be substantially reduced for virtually all home buyers, and potentially reduced to a very small amount for an urban or suburban homeowner.

By way of example, if I want to buy a used car - even a $100,000 used car - it's a relatively simple process of transferring the title. If a secured lender is involved, they should be reflected on the title - and they will likely lose the benefit of the security interest if they fail to secure their lien and the vehicle is sold to a buyer who acts in good faith and without knowledge of the creditor's claim. But if I want to buy a house that costs half as much, I'm in an entirely different world of cost and complexity. While legitimate differences exist that will likely keep the transaction costs higher, most of the present costs are waste associated with the preservation of archaic, inefficient systems of property titling and transfer.
They did not pay for benefits
written by Floccina, October 03, 2012 5:00
Oh yeah, these people also paid for their benefits, but whose counting?


They did not pay for benefits, they were taxed. The money was taken it is not like they paid for a guaranteed benefit.

Also perhaps he wants to remove the cap off the payroll tax.
...
written by Douglas Neiss, October 03, 2012 5:27
"(all underwater homeowners with loans guaranteed by Fannie Mae and Freddie Mac can now refinance their loans)" ...

Not quite. To be eligible for refinancing, your mortgage had to have been acquired by Freddie Mac by May 31, 2009. Ours was not acquired until December of that year so we are still stuck underwater, like millions of others, and paying an interest rate about two points above the going one.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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