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Romney's Jobs Plan Relies On His Tax Proposal

Republican presidential candidate Mitt Romney shakes hands during a rainy campaign rally Monday in Newport News, Va.
Evan Vucci
Republican presidential candidate Mitt Romney shakes hands during a rainy campaign rally Monday in Newport News, Va.

As part of Solve This, NPR's series on major issues facing the country, we're examining the presidential candidate's approach to boosting employment. After looking at President Obama's strategy, it's time to examine the plan of GOP nominee Mitt Romney.

Mitt Romney says he has a plan with 59 bullet points detailing how to boost growth and job creation. He gives a short list in one of his most recent ads:

"First, my energy independence policy means more than 3 million new jobs, many of them in manufacturing. My tax reform plan to lower rates for the middle class and for small business creates 7 million more. And expanding trade, cracking down on China and improving job training takes us to over 12 million new jobs."

That's 12 million new jobs in his first term in office. As Romney says, more than half of those jobs, 7 million, would be generated by his tax plan. One of the people behind that tax proposal is Kevin Hassett, a Romney economic adviser and senior fellow at the American Enterprise Institute.

"Gov. Romney's tax plan is modeled after the successful tax plans of the past, and it would generate growth because it would increase the incentive to do things that are good for America's economy and America's workers," Hassett says.

Romney's tax plan would cut tax rates by 20 percent for all taxpayers. That would cost the Treasury almost $5 trillion in lost tax revenue over 10 years. But Romney says it won't cost $5 trillion, because he will offset the losses from lower rates by ending deductions and closing loopholes; he has not said which ones.

Joel Prakken, chairman of the firm Macroeconomic Advisers, says it would be very difficult for Romney's plan to work without ending some very popular deductions — "mortgage interest, health care benefits and the like."

"And so, there's some concern out there about whether it actually will be possible to engineer this kind of tax reform with such sharp cuts in marginal rates," Prakken says.

Romney has recently suggested he might just cap taxpayers' deductions to $17,000. But some analysts say it's doubtful that would fully pay for the cost of Romney's tax cut, either.

Prakken says the elimination of deductions and loopholes could lead to faster job creation in the long run, but in the short term it could eliminate jobs in industries like housing that are already struggling.

"Until we see precisely how the lower rates are going to be paid for, in terms of broadening the tax base, it's very difficult, it's just impossible, in fact, to make an unqualified statement about just how much growth we're going to get from this kind of tax initiative," Prakken says.

As for the 12 million new jobs Romney says his policies will produce in four years, Prakken says it's not a very high bar.

"In our long-term forecast, in which we assume the continuation of current policies and an economy that's recovering toward full employment anyway, we were able to create roughly 12 million new jobs without recourse to these policies," Prakken adds.

But Hassett, the Romney adviser, disagrees that 12 million jobs could be created under current policies.

"We've got massive deficits. We've got a corporate tax that's just out of whack with the rest of the world. We've got an enormous amount of new regulation coming in, and I think that all those things are very, very negative for growth and job creation," Hassett says.

What about Romney's claim that he'll create 3 million new jobs in energy? Prakken says there will be significant job growth in that sector over the next 10 years, but not because of presidential policies. Rather, Prakken says, it's because the energy sector is in the midst of a boom due to the development of hydraulic fracturing, which is releasing huge quantities of U.S. gas and oil.

NPR's John Ydstie took a closer look at Obama's jobs strategy Monday onAll Things Considered.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.