Of the two candidates for President of the United States, Martin Wolf prefers the incumbent, even though his “vision is inadequate”, to Mitt Romney, who is “George W. Bush reheated”.
Given Mr Romney’s commitment to large increases in defence spending, the outcome would surely be a large rise in structural fiscal deficits. Republicans have proved much less hostile to deficits in practice than in theory. Tax cuts are their true fiscal religion. The good side of this is that the US will need those deficits, for some time. The bad side is that such policies are more likely to generate a brief expansion than solid growth.
Republicans believe that the key to performance is less regulation and lower tax rates. Yet a shift from rates of 35 per cent to ones of 28 per cent is unlikely to have a noticeable effect on aggregate performance. Yes, taxes matter. But the view that they determine economic performance on their own is certainly wrong.
Martin Wolf, “Romney would be a backward step“, Financial Times, 31 October 2012.
Martin’s column provoked strong reactions in the comments section. One reader wrote “Mr. Wolf, with all due respect, sir… you are an idiot. As are all of your kind. America does not have a tax problem. She has a spending problem.” Another wrote “Mr. Wolf is right. Romney will be a step backward, unless he is not going to do what he said, after he gets elected.”
As always, there is much more in the full column, which focuses on “four economic challenges …: demand, supply, inequality and fiscal solvency”.