Thursday, October 13, 2011

Why Isn't Mitt Romney Gaining More Traction Despite Winning the Debates?

Mitt Romney has been viewed as the front runner for the 2012 GOP nomination for quite some time now.  And since the beginning of 2011, he has won or nearly won every GOP debate (at least according to pundits from both left and right), coming across as a very polished and professional candidate (he is the Dorian Gray of the GOP after all), someone who can wipe the floor with Obama.  He has even seen one rival, Pawlenty, quit the race (and endorse him) and two others, Bachmann and Perry, peak and crumble.  Between this and some key endorsements, you would think Romney should be riding high with 40%+ poll numbers that would be practically unassailable short of a scandal.  Unfortunately for him, you would be wrong.  Romney has languished at the same levels for the last year, never being able to break out of the 20% range.  Even worse, he has made no improvements in his polling numbers since he dropped out of the race the last time on February 7, 2008.  This after he has been campaigning for President almost continuously since the last election and with much of the establishment lining up behind him for the current run.

I think his main problem is that, while he does keep winning debates, he keeps letting things slip which demonstrate to us that he has not really changed at all since his Romneycare days.  Take Tuesday's debate in New Hampshire and the question that Newt asked him about capital gains taxes in his 59 point plan:

GINGRICH: Governor Romney, I'd like to say, first of all, there is an awful lot in your plan that is very good, and that I think would be very helpful if implemented, a lot better than what Obama is doing.

But one of the characteristics of Obama in his class warfare approach has been to talk about going after people who made over $250,000 a year and divide us.

And I was a little surprised -- I think it's about page 47 of your plan -- that you have a capital gains tax cut for people under $200,000, which is actually lower than the Obama model. Now, as a businessman, you know that you actually lose economic effectiveness if you limit capital gains tax cuts only to people who don't get capital gains.

So, I'm curious, what was the rationale for setting an even lower base marker than Obama had?

ROMNEY: Well, the reason for giving a tax break to middle income Americans is that middle income Americans have been the people who have been most hurt by the Obama economy. The reason that you're seeing protests, as you indicated, on Wall Street and across the country is, middle income Americans are having a hard time making ends meet.

Not only do we have 25 million people out of work, or stopped looking for work, or part-time jobs needing full-time employ, we just saw this week that median income in America has declined by 10 percent during the Obama years. People are having a hard time making ends meet.

And so if I'm going to use precious dollars to reduce taxes, I want to focus on where the people are hurting the most, and that's the middle class. I'm not worried about rich people. They are doing just fine. The very poor have a safety net, they're taken care of. But the people in the middle, the hard-working Americans, are the people who need a break, and that is why I focused my tax cut right there.

Besides using Obama-like class warfare rhetoric the plan itself is pretty stupid.  Just guess what percentage of total capital gains can be attributed to those making $200,000 or less according to the latest IRS data (2009)?  A whopping 4.5%!  Out of $199.5 billion in capital gains, only $9 billion is from those making under $200,000.  And just to show how insignificant this number is, consider that the total income for those making under $200,000 is $3.2 TRILLION.  So capital gains earnings as a percentage of total earnings is only 0.3%.  As we tax capital gains at levels between 15 and 35%, eliminating capital gains would be the equivalent of letting those making under $200,000 keep an additional 0.1% of their pay!  Talk about a rounding error.  How is such a feeble amount supposed to spur investment as it is supposed to do under Romney's plan?  This is clearly all about style and not about substance.

Another point in the debate where he let things slip was this:

CAIN: Yes. One of my guiding principles has been and will always be, surround yourself with good people. The 999 plan that I have proposed is simple, transparent, efficient, fair, and neutral.

My question is to Governor Romney. Can you name all 59 points in your 160-page plan, and does it satisfy that criteria of being simple, transparent, efficient, fair, and neutral?



ROMNEY: Herman, I have had the experience in my life of taking on some tough problems. And I must admit that simple answers are always very helpful, but oftentimes inadequate.

Spoken like a true technocrat who believes in big government.  It's the idea that we need complex solutions to our problems which gave us tens of thousands of pages in the Federal Register and a tax code that is impenetrable to most taxpayers.  When you make things complex, it is hard for business owners to really feel confident that they know how much certain investments may cost them and so they won't make them.  If you don't know if a healthcare plan is going to cost you $20k per employee or $40k per employee in a few years how many people are you going to hire?  If you don't know what environmental and labor regulations you will have to deal with, are you really going to feel confident opening another plant?  The idea that we need complex solutions is really what got us in this mess in the first place.

And that is why I am really warming up to Herman Cain.  I know there are people that are very critical of his 9-9-9 plan, but based on my experience in DC and watching from outside, it pretty much has a zero percent chance of passing so debating its minutiae is a waste of time.  What is more important than the plan itself is the idea behind the plan and, even more importantly, the man who came up with the idea.  The idea of 9-9-9 is to radically simplify our tax code which will unshackle $430 billion that we spend every year just to comply and enforce the damn thing.  Also, by making things so simple, politicians will not be able to hide behind their euphemisms any more.  Raising taxes will be raising taxes, not "closing loopholes".  Clearly, Herman Cain will do everything in his power to simplify the tax code and make America much more business friendly by simplifying our regulatory structure. That is what is important.  And I think normal Americans understand this, which is why has a very good shot of winning the whole thing.  When other GOP candidates blow up, Romney has not been benefiting at all and when the field starts to seriously thin out I don't necessarily see things changing.  Why would a Santorum, Bachmann, Gingrich or Perry voter go to Romney?  Aren't they much more likely to go for Cain?  My one concern about Cain is that he clearly doesn't have an "A" caliber staff helping him.  He comes across as unprepared for some questions and you can clearly see he is making stuff up as he goes along.  Luckily that is easily rectified with some funds and good judgement on personnel.

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