“…without actually doing anything”, Mitt Romney believes the economy will improve simply by him winning the election. Romney and Ryan have remained steadfastly nonspecific about their plan to improve the economy leading some pundits to refer to it as faith based or voodoo economics.
It’s hard to tell a story about why uncertainty would hurt residential investment, but not nonresidential investment. It’s not hard to tell a story about why a housing bust would hurt housing investment — and drag down overall demand. Indeed, a paper by Michael Bordo and Joseph Haubrich of the Cleveland Fed found that housing recessions typically lead to slower recoveries for this very reason. Higher inflation, refinancings, or writedowns would speed up this deleveraging proces. A Romney — or Obama — victory alone would not.
Romney’s magical thinking is the consequence of Republican obstruction. From the beginning, Republicans have been quite candid that their number one goal is making sure Obama is a one-term president. From the stimulus to Fed appointments to the abortive American Jobs Act, they have tried to block anything that might help the economy — while decrying it all as dangerously outside the mainstream. There’s a problem. It’s not. The Obama administration has just followed textbook economics — spending more and cutting interest rates amidst a slump — much as a hypothetical McCain administration likely would have followed textbook economics. After denouncing these policies for years, the Republicans can’t very well run on them. So they blame those policies for creating uncertainty, evidence be damned.
There is more from Salon
The notion that Romney could spur economic growth “without actually doing anything” invites mockery. The Atlantic’s Matt O’Brien memorably dubbed it “faith-based economic strategy.” At the very least it seemed to betray a breath-taking level of unwarranted hubris. But the key to understanding his boast is to ignore the low-hanging fruit (“without actually doing anything”) and focus on five crucial words: “We’ll see capital come back.”
Romney is referring here to the reluctance of corporations to invest trillions of dollars of cash in productive, job-creating uses. It’s a problem acknowledged by both Democrats and Republicans — American corporations have around $1.8 trillion in cash tucked away in savings accounts or invested in low-yield bonds and ultra-safe government securities. Liberal-minded economists believe that corporations are sitting on all that cash because they see no demand in the general economy for their goods and services. Conservatives argue that the real problem is the prospect of higher taxes and burdensome regulations imposed during a second Obama term.
