Larry Summers, who served as the Director of the Council of Economic Advisors until 2010, argues in today's Financial Times that candidates should avoid making election year promises about tax policy because they'll get roped into bad policies. Summer cynically elaborates that "the more tax issues are discussed during the campaign, the more the candidates will be driven to make pledges about the things they will never do â pledges that might make tax reform that much more difficult."
Summers rightly believes that voters lack the ability to differentiate between long-term debt reduction plans. His solution:
Leaders in both parties should commit themselves to the goal of tax reform for growth, fairness and deficit reduction. They should acknowledge that every tax expenditure or special break has to be on the table. They should ensure their staffs are compiling a large inventory of options. The relevant Congressional committees should take testimony from experts of all persuasions. And then, right after the election, the negotiations should begin. Nothing that is likely to done during the next presidential term will be more important.
This explains the Obama administration's tentative embrace of elements of the Bowles-Simpson deficit reduction plan only after the 2010 midterms. Unfortunately, on the most important policy issue of our generation, democracy is merely an impediment. This is a cynical perspective, but one born out by Romney's recent, and egregious, missteps.
Romney has recently made just the mistake that Summers wants to avoid. Romney's tax plan, that he unveiled in Detroit last Friday, entails dramatic tax cuts, keeping Medicare, Social Security and military spending at their current levels, and any sort of "tax hike" off the table. Then how does he propose to close the deficit? In Romney's magical universe, the United States will see 12 percent yearly growth, keeping pace with China.
Even David Frum laments how Romney has "now finally eliminated the policy differences separating him from the radical congressional wing." Really, though, Romney has made the cardinal mistake of letting interest groups (and the most radical ones at that) have a say in crafting the details of his tax policy.
Even if moderates and even some liberals entertain the notion that a President Romney would govern to the center, the promises that he's made to get elected will make effective governance impossible.