Does Mitt Romney's expertise translate to his ability to lead the US economy?

My column in the Sky Hi Daily News today:
We live in a short-hand, sloganeered and sound bite world but it is worth our time to get into the weeds, especially when complex issues of the economy are involved.

I took a deeper look at some recent sound bites regarding the auto bailouts, Wall Street regulation, and debt/budgets  and came out of the wonky weeds shaking my head. Mitt Romney's expertise has not translated into good judgment, or good public policy, or even good banking practices.

Let's look at Romney's claim that a private sector auto industry bankruptcy would have been better than the Obama bailout. It is fundamental to his claim he was a fixer of the economy's problems and a job creator and it illustrates why a banking perspective does not always make for good public policy. The number of jobs that could have been lost in 2009 if GM and Chrysler went under (including the ripple effects to parts suppliers and others), would have been 3 million, auto executives predicted. If Obama had not fixed it with the government bailout, we would still be looking at an unemployment rate in 2012 much higher than 8.1 percent.

The fix Romney advocated publicly in 2009 and still defends was to let the private sector provide the capital for a structured bankruptcy. There must be capital provided by investors in a managed bankruptcy, or the enterprise has no way to pay its workers, parts suppliers, or any other costs of doing business. It padlocks the gates and employees become the unemployed.

The reality in 2009 was there was no private capital to do it. Either Romney was being deceptive to make a political point or he was blind to the investment climate. Even when challenged later to name any private investors willing and able, he couldn't. The Obama administration understood that and provided the capital by the way of government money (the bailout) so the factory gates remained open while needed changes were made. The U.S. auto industry has roared back and many of those laid off are now back to work.

This month JP Morgan-Chase lost over $2 billion in proprietary trades gone bad. Luckily JPM is strong enough to survive, but the same could not be said for other banks. Had Wall Street Reform (Dodd-Frank) with its Volcker rule been implemented, it may have prevented certain kinds of proprietary trades that risk a bank's own funds. If trades were simply bad judgment calls that could take down a bank, the reform would provide a way to wind down a big bank without taking down other banks, avoiding what  caused the 2008 crash and bailouts. The financial service lobbyists have successfully delayed implementation of Wall Street reform that includes the Volcker rule. Romney's position? Repeal Wall Street reform. Bad business, Mitt Romney.

Coming to a head this summer is the Ryan plan and GOP's extreme reliance on austerity as the solution to both the budget and debt. Romney has called this approach “marvelous.” The GOP's reliance on cuts in social programs while increasing Pentagon spending has been condemned as immoral by the Catholic Bishops because it cuts into the poor's safety net. This is the same single-minded reliance on cuts to recover from the 2008 crash that Europe has tried, with Great Britain and seven countries in the Euro Zone now facing a double dip recession, higher debt, and no growth.  

The GOP scares the pants off of voters, pointing to the Greek situation with “we too could go their way if we do not get our debt under control.”  Even Democrats agree we must solve the debt problem. The question is “how?” The GOP identifies the right problem and advocates the wrong solution. To tackle debt takes a balanced approach like Simpson-Bowles of some stimulus and some austerity as Obama has done. Relying on cuts alone cripples recovery. That is the lesson Romney and the GOP should take from Europe.

For more, visit www.mufticforum.com, www.mufticforumespanol.blogspot.com

Hope vs Back to the future; what would it have been like if the GOP won in 2008

My Column in the Sky Hi News on line edition today: The GOP presidential contenders are putting their eggs in one basket: The voters are feeling so much pain, anyone would be better than Obama. Oh?

Some in the GOP seem to yearn to return to the time of John Adams, when Abigail could run the farm and cash flow was only a nagging problem because she could raise their own food, sew her own clothes, and pay the doc in chickens.

That bucolic life is long gone thanks to the industrial revolution, the intertwined world economy, urbanization, an economy driven by middle income consumer spending, and expensive life-saving medical technology. “Each to his own and each on his own” has moral and economic implications. To what extent should we be our brothers' keeper? Is it good for the economy to leave one half of Americans near or in hopeless poverty?

To compensate for tax cuts, ground wars, and stagnant income, we plunged ourselves into deeper government and personal debt. Starry eyed, we put our money in unregulated investments based on questionable mortgage loans until the economy imploded in 2008.

When I hear voters wistfully say they just want it like it was before, for which “before” are they yearning? — the latter 1700s or the bubble of the early 2000s?. Most of the GOP's roadmap to prosperity is the bubble model that replicates their previous route that led to prosperity for the few, a col de sac for many, and eventual disaster for all.

Low taxes and less regulation did not lift the boats of the middle class much from 2001-2007, while the upper incomes soared, per the Congressional Budget Office. Job loss and recession began nearly the year before the crash of fall 2008. The theory that wealth trickles down to the middle class did not work well in practice.

The GOP is not about applying balm to middle income pains. They want to repeal help for Elm Street to aid Wall Street and Fifth Avenue, with more tax breaks to an already robust financial sector and the comfortable rich, repealing health care and Wall Street reform, and weakening consumer protection.

We can imagine a GOP future by going back to their past.  What would it have been like with a Republican or a Mitt Romney controlling Washington for the last three years instead of having the reforms and policies Obama supported and instituted? The financial sector would still be free to hoodwink investors and homebuyers, one bank failure could still bring down other banks, and we would still drown in the cost of more or indefinite ground wars. There would have been no pressure on banks to refinance responsible homeowners, and the housing market would be seeking an even deeper bottom. Detroit would have gone bankrupt; 1.4 million jobs would have evaporated as the industry would have moved abroad. The 2009 stimulus would not have been passed and another 2.3 million jobs would have been added to the unemployment count.

The Ryan plan would have passed so future seniors would pay $6,000 more a year for Medicare. 30 million citizens  could never hope to afford health insurance. Sending kids to college would have become a fading dream, with shrinking access to student loans, and continued unrealistic burden of paying back them back.

Simpson Bowles debt reduction plan would have been completely ignored because it recommended GOP no-no's   of reducing military spending, continuing cost saving Obamacare, and raising taxes on the rich, the very recommendations embraced by Obama.

In his State of the Union address, Obama gave us a new vision of “hope,” a fair shake for the future for the middle income. With all economic indicators zigzagging upward, he can rightfully claim he has indeed turned around the economy, if not yet cured it, and that a Republican future would be a leap back to the policies from whose consequences we are now trying to escape.