When discussing Mitt Romney’s record on the economy, one of the most important things to examine is his budget. What are his plans for the federal budget if he’s elected? How does he intend to address the stagnating economy or reduce the deficit? Is it possible for Romney to bring back the budget surplus last seen during the Clinton administration?

It’s hard to figure out exactly what a Romney budget will look like, because he hasn’t actually come out with a specific budget proposal. This isn’t unusual; he’s running for office and any budget proposal is likely to have aspects that could be politically dangerous.

He has, however, made several statements over the last few months regarding policy goals that would certainly have an impact on his budget. These statements can be found in the Center on Budget and Policy Priorities report. I have also listed them below.

1) Cap total spending. Romney said that, as President, he would “reduce federal spending to 20% of GDP by the end of my first term” and then prevent it from rising above that level.

2) Increase defense spending. He said he would “set a core defense spending floor of 4% of GDP,”

3) Cut taxes. Romney will permanently extend the Bush tax cuts of 2001 and 2003 as well as a variety of other tax cuts that are scheduled to expire in the coming years. He will also eliminate capital gains taxes for low and middle income families, reduce the corporate income tax, get rid of the estate tax, and repeal the new taxes introduced in the Obama administration’s 2010 healthcare law.

4) Balance the budget. As he said, “I am planning on balancing the budget.

He has also indicated that he will not cut social security and that there would not be any significant budget cuts in 2012 or 2013, as that would “cause us to enter into a economic decline”.

According to the budget analysis from the CBPP:

For the most part, Governor Romney has not outlined cuts in specific programs. But if policymakers exempted Social Security from the cuts, as Romney has suggested, and cut Medicare, Medicaid, and all other entitlement and discretionary programs by the same percentage — to meet Romney’s spending cap, defense spending target, and balanced budget requirement — then non-defense programs other than Social Security would have to be cut 29 percent in 2016 and 59 percent in 2022.

The cuts that would be required under the Romney budget proposals in programs such as veterans’ disability compensation, Supplemental Security Income (SSI) for poor elderly and disabled individuals, SNAP (formerly food stamps), and child nutrition programs would move millions of households below the poverty line or drive them deeper into poverty. The cuts in Medicare and Medicaid would make health insurance unaffordable (or unavailable) to tens of millions of people.

My Dad is an ex-Marine who fought in the Vietnam War. So I find it particularly repugnant that Romney would cut disability compensation for veterans, who have sacrificed more for our country than many of us (myself included) can possibly imagine.

Furthermore, as indicated by the CBPP report, cuts in those programs would push millions more Americans below the poverty line or deeper into poverty. The cuts in Medicare and Medicaid would result in more emergency room visits for non-emergency matters, contributing further to rising healthcare and insurance costs.

While these cuts would likely take place well into Romney’s first term, a reduction in discretionary government spending of 29 percent by 2016 would result in the loss of millions of jobs across the country at the federal and state level.

Even if the economic recovery has picked up steam by then – which appears unlikely if the federal government doesn’t begin pursuing growth-oriented programs – mass layoffs on such a scale could easily push the economy back into recession.

The non-partisan Tax Policy Center estimates that the tax cuts proposed by Romney, including an extension of the Bush tax cuts of 2001 and 2003, would cost $4.9 trillion over 10 years.

Romney’s proposed cuts would allow him to balance the budget on the backs of the working poor while cutting taxes for the wealthiest Americans.

Based estimates by the Congressional Budget Office and Tax Policy Center, Romney’s budget cuts will actually be more severe than those in the Paul Ryan budget. Ryan proposed $5 trillion in cuts over the next 10 years, while Romney’s cuts would total between $7 and 10 trillion.

In short, the statements that Mitt Romney has made regarding his budget priorities are nothing new. They’re a continuation of the same failed Bush-era policies that reversed the budget surpluses of the Clinton years, causing the fiscal crisis in the first place.

Like Romney said in his April 24 presumptive nominee ‘victory’ speech, “it’s still about the economy, and we’re not stupid.”

You’re right, Mr. Romney. We’ve seen your budget proposals, “and we’re not stupid”.

Please visit parts 1 and 2 of my discussion on Romney’s economic policies for analysis of his statements on foreclosure and the auto bailouts.

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Image Credit Gage Skidmore

In the latest USA Today/Gallup poll, conducted May 10-May 13, 55% of respondents say that the economy will be better in a year if Mitt Romney is elected president, compared to 46% who say the economy will be better if President Obama is reelected.

These results are far from surprising. Nearly every poll since Romney became the presumptive Republican nominee has shown that Americans rate Romney better on the economy than Obama.

Just like Mitt Romney said in his April 24 speech, “it’s still about the economy, and we’re not stupid.”

But what has Romney done to prove that he would have handled the economy better than the President?

Over the next few posts, I’ll examine three of Romney’s most notable positions on the economy.

By the way, anyone who’s hoping to see another article about how Romney ruined companies and fired workers while he was CEO at Bain Capital will be sorely disappointed. This post isn’t about Romney’s record in the private sector. It’s about his record and statements on the economy and on the current state of economic stagnation.

Part 1: Foreclosures

In interviews and in the Republican presidential debates, Romney frequently said that the best thing for the government to do was stop intervening in the housing market with programs such as HAMP and HARP. According to him, the government should just let the foreclosure process run its course.

He said, “Allow investors to buy homes, put renters in them, fix the homes up and let it [the housing market] turn around and come back up. … The Obama administration has slow walked the foreclosure process … that has long existed and as a result we still have a foreclosure overhang.”

Sounds good, right? He is correct that there is a “foreclosure overhang” in this country. A foreclosure overhang happens when so many borrowers are behind on their mortgages that banks just can’t keep up. The problem is, Romney’s plan would have made the foreclosure overhang much worse than it is.

Let me explain how.

If the government had allowed the foreclosure process to run its course, many of the estimated 14.7 million underwater homeowners would have been thrown out of their homes.

Ignore, for a moment, the immense human suffering this plan would have caused. Foreclosures on such an immense scale would have resulted in an even greater supply of distressed properties on the market and would have added to the already significant foreclosure backlog.

It would also have further depressed property values, making more homeowners underwater, and it would have made the road to recovery even longer and more treacherous than it already is.

The Obama administration’s HAMP and HARP programs, on the other hand, have kept borrowers in their homes and kept them paying their mortgages, thereby reducing banks’ foreclosure backlogs. Borrowers that aren’t being foreclosed upon or evicted are also more likely to spend money on “luxury” items (items not crucial for survival), which helps support the economy.

In other words, Romney’s plan would have added to the “foreclosure overhang”, while President Obama’s has reduced it by reducing the number of people who are behind on their loans.

Where did Romney think investors and aspiring homeowners would get the money to buy all those foreclosed properties, anyway? Banks have become extraordinarily risk-averse since the housing market collapsed, making it exceedingly difficult for even the most creditworthy borrowers to get loans.

Even with government intervention through programs like HAMP and HARP, US home prices are just beginning to stabilize (maybe). How much longer would it have taken if Mitt Romney had been President during the housing crisis?

Of course, Romney changed his mind later at a campaign stop in Florida, saying that banks should “move on and start over away from those debts”.

Mr. Romney, we’ve seen your record on foreclosures, “and we’re not stupid”.

Come back tomorrow evening for a discussion on the effect Romney’s Detroit bankruptcy plan would have had on the economy.

Welcome to Economics, Politics, and the Environment, where I will pontificate at length on issues that I think are important. You have no doubt already guessed what many of those topics will be.

A little about me: I have a bachelor’s degree in Economics with a minor in environmental science and (almost) one in politics. I am endlessly fascinated (an usually very frustrated) with our economy and political system, and I’ll admit that I’ve become a little obsessed since the start of campaign season.

I am currently employed in the mortgage due diligence industry, though my interests lean more towards sustainability and renewable energy economics and policy. It has, however, given me a lot of perspective on the sub-prime mortgage crisis and resulting recession, as well as the housing market in general.

In the fall I will be starting graduate school for natural resource and environmental economics.

Now, maybe you’re thinking, “Economics is boring! Why would someone want to study so much of that?!”

Sometimes economics is really boring, I’ll admit. But most of the time, I think it provides a unique way of looking at the world that, at least for me, helps me make connections between policy, the economy, and sustainable practices that might otherwise never occur to me.

I’m also an insatiable reader, so expect occasional posts about what I’m reading and why you should read it too.