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Bill Folman Headshot

Which Candidate Is the Better Investment?

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Dear Disenchanted Voter:

Let's be honest: Recessions go in cycles. No matter whom you elect, the economy is probably going to improve over the next four years. The 12 million jobs that Mitt Romney is promising are what economists have said we're going to get no matter who is in office. And as for gas prices, any candidate who promises he can affect the amount you pay at the pump is lying. There are limits to what a president can do. And because this is a campaign between two men who represent the moderate wings of their respective parties, it is easy to fall into the trap of thinking that it doesn't much matter whether Romney or Obama wins on November 6.

But it matters. It really matters.

For those of you who are attracted to Mitt Romney's business background, I think it is useful to view the choice between Obama and Romney as a choice between two very different business strategies. Ignoring all the more explosive social issues for a moment (and foreign policy, where their views are largely similar), let's go issue by issue and ask ourselves:

Which candidate is the better investment?

(Note: I'll try to be as fact-based and non-partisan as possible with these points, and I'll start the list with the first items of Obama and Romney's respective plans)

Innovation -- Countries like China are pouring huge amounts of public money into green technology because they know it will power tomorrow's economy. Mitt Romney believes government funding for research should continue (although he would cut it) -- but otherwise thinks government should sit this one out. Problem is: that puts American companies at a huge competitive disadvantage. This is the nuclear arms race of our time, and we cannot afford to fall behind. Barack Obama has increased research funding and championed public/private partnerships to keep us competitive with the Chinese and Europeans. These investments -- despite what you may have heard -- actually have a stellar success rate so far. Advantage: Obama

Infrastructure -- roads, bridges, water, power -- Obama has already had success here, and he keeps pushing to make these investments now because the prices are low and it puts people to work. With Romney's budget, there's simply no room for infrastructure spending. Which means these projects gets pushed down the road to a time when interest rates are higher and everything is more expensive. That's bad business. Advantage: Obama

Energy Independence -- According to our current trajectory under President Obama, we are on our way to eliminating all natural gas imports by 2020 and cutting our oil imports down to 38 percent. Mitt Romney thinks we can get oil imports down to 0 percent in that same time by opening up new lands to drilling and reducing regulations. It's questionable how much of his goal is achievable (because many regulations are at the state level), but Romney's strategy could slightly boost GDP. It also has the potential to create some jobs, although his numbers are wildly inflated and they include jobs we're already on track to get. Any additional new jobs are unlikely to affect the unemployment rate. Caveats aside, this still may be enough for some of you to give Romney the advantage in this category. The problem is that more drilling and fewer regulations can have unfortunate environmental consequences (a lesson we learned from the BP oil spill). Also, Romney wants to reverse Obama's increased fuel efficiency standards, which economists agree are a major part of getting us to energy independence. I'd give the advantage to Obama here, but your priorities may be different so let's say... Advantage: Debatable

The Keystone pipeline -- Why won't Democrats approve this? Won't it produce jobs? Yes, in the short term (2,500-4,650 jobs) -- but these would be temporary, and the pipeline may actually cost the U.S. jobs in the long run. This is the opinion of the only independent study of the proposal (i.e. not funded by oil interests). This Cornell University study also determined that building the pipeline will probably increase our gas prices -- yes, you read that correctly -- because it would mean exporting more of the cheaper North American oil and subjecting it to market prices (it's a complicated issue, but this U.S. News article breaks it down well). The bottom line is that the only ones who profit here are the oil companies. The Keystone pipeline poses major environmental risks for zero (and possibly negative) financial impact on your gas budget. And while we're on the subject of gas prices, let's be clear on one other thing: drilling for more oil in America will not lower your gas bill. Read why. Advantage: Obama

Education -- We are being out-educated by countries that place greater strategic and financial importance on education -- and that needs to change. Barack Obama has been so consistent on making education a priority. By contrast, Mitt Romney has promised to roll back the president's student loan reform that has saved $60 billion so far and shrink the Department of Education. Both the economics of his budget plan and his history in Massachusetts suggest that more cuts to education are inevitable if he's elected. FYI, Romney brags about Massachusetts schools being #1 in the nation, but this rise in the rankings was triggered by increased spending and reforms implemented 10 years before he was in office. His actual education record is a mixed bag. Advantage: Obama

OK, big surprise so far. You might have guessed that Obama would have the advantage when it comes to energy and education. What about the meat and potato items?

Jobs, jobs, jobs!
-- Obama's plan makes more investments in future growth -- but what about jobs right now? The Republicans make it sound as if the president is stifling job growth with red tape and taxes, and they've used the phrase "job killing" so many times that it's easy to start believing it. The reality, however, is different. The Economic Policy Institute, a non-partisan think tank, actually crunched the numbers, comparing the Obama and Romney budget proposals to see which one would produce more near term job growth, and they gave the win to Obama. Here's the thing: it wasn't even close. Perhaps this shouldn't come as a surprise. During Romney's time as governor, his state ranked 47 out of 50 in job growth. Advantage: Obama

Trade -- Both Obama and Romney talk tough on China -- although Romney is trying to talk tougher, promising to label China a "currency manipulator" (a risky move that has even Republican economists concerned). Obama has a good record here, and it is hard to predict whether Romney can be any more effective. Neither candidate has offered much substance on the subject of Latin America. Romney's calls for increased focus on the region is smart, but his few specific suggestions are sometimes misguided. Here's a good article if you want to try and unravel this one. Advantage: Debatable

The Deficit -- Neither candidate has proposals ambitious enough to eliminate our deficit, but Obama's plan (whether you buy the rosy numbers or not) at least moves us closer to the goal. Romney's plan, by contrast, is so mathematically fantastical that this one issue alone should prevent any reasonable voter from investing in him as president. Where Obama more than pays for his spending by letting the upper income tax breaks expire, closing tax loopholes, ending wars, and making more modest fixes, Romney piles seven trillion dollars onto the debt through upper income tax breaks and unnecessary defense increases -- with no hope of remotely closing that gap. It's not that Romney doesn't have deficit reduction strategies. It's just that these strategies are insufficient to meet his shortfalls. Many of them are also... terrible ideas -- but before we get mired in the details, let's hand this category to Obama purely on the math. Advantage: Obama

Big Government -- There are two misconceptions here: First, that Barack Obama dramatically increased the size of government. False. Total government employment actually shrank on Obama's watch (unusual for a recession), and federal employment grew only slightly. Compared to the overall economy, the federal government is actually smaller than the post-War average -- and shrinking. Misconception #2 is that "big government" is the evil scourge responsible for our current economic crisis. Also false. Our crisis was caused by two wars and a tax cut that were put on a credit card and a lack of regulation that led to a housing collapse. The idea that starving government is the solution to this problem is a bait and switch. Republicans keep making the argument anyway because they see our rising debt as an opportunity to pursue the same agenda they've always pursued. But is dramatically shrinking our government wise? Most economists agree it would be not only difficult but dangerous. Strategic cuts can work, and Obama has been proposing them -- but dramatic cuts of the Romney/Ryan scale will result in massive federal layoffs that could cripple our economic recovery. Advantage: Obama

Medicare -- Both parties agree that Medicare is our single biggest fiscal challenge. It needs to be reformed -- but who can actually get it done? Romney talks a good game, but his advisers on Medicare are all folks who support turning it into a voucher system, something economists warn will not keep pace with rising healthcare costs. Even so, let's give Romney the benefit of the doubt for a moment and imagine that he actually introduces a reform bill that does not voucherize Medicare. Will he be able to get it past Democrats in Congress? Not likely. Medicare is the Democrats' baby, and they will not trust a Republican president to protect it (not after the Republican party has spent the last 50 years trying to get rid of it). By contrast, Obama actually DOES have a chance to pass meaningful reform precisely because the Democrats trust him not to destroy the program he's reforming. There's a reason it took a Democratic president to pass Welfare Reform. The same logic applies to Medicare. The smart investor says: Advantage: Obama

Historical Trends -- All savvy investors look at historical trends when deciding where to place their bets. President Obama has been accused of a weak recovery, but the current timetable for our recovery is actually typical for a recession of this size and depth (read this to debunk what you may have heard on the topic). History suggests a dramatically improved economy in the next four years. But which candidate can improve it more? Let's look to the past again. You may be surprised to learn this, but the stock market has consistently performed better under Democratic presidents. More impressive, over the last 50 years, job growth is also stronger under Democratic presidents by nearly a two to one margin (and that's just private sector job growth; imagine if we factored in government jobs as well?). Advantage: Obama

*****

Going down this list, I hope it is clear to you that Barack Obama is the smarter investment, the man more likely to put America in a stronger economic position going forward. In making the list, I haven't even touched on some of the most compelling arguments for his candidacy: his thoughtful, decisive leadership; his forward looking views on equal rights, or the ways in which he has improved America's image abroad and repaired our alliances. I've tried to keep the focus on the bread and butter issues, and on bread and butter, Obama is the clear winner.

I'll leave you with one final argument in case you are not convinced. It is an argument that speaks to the core difference between Obama and Romney -- and between the Democratic and Republican parties of today.

Inequality Economics -- Historically, there has always been a correlation between income inequality and the health of the economy. When the gap between rich and poor is smaller, like in the '50s and '60s, the economy thrives. When that gap widens, like in the Gilded Age, watch out. The wealth gap has been growing dramatically since 1980, and it is currently at levels not seen since the 1920s. Why? Two major reasons: a rigged tax code and financial deregulation. Starting with Reagan, the Republican party (sometimes in collaboration with Democrats) has repeatedly cut the uppermost tax rates and slowly deregulated the financial industry. Just look at this chart (and this one) to see how much richer this has made those at the top.

Obama knows we must reverse these trends. He has already pushed for increased regulation with the Dodd-Frank bill (not the best legislation; but an improvement), and he has called for a modest tax increase for the top earners. Republicans call this "redistribution" -- which it is -- but that doesn't mean it's wrong. It is, in fact, a moderate proposal, consistent with our history. Good business practice.

Compare this to Romney's plan. On item after item, Romney also redistributes--but in the wrong direction! When he cuts nondiscretionary spending 5% across the board to finance his tax cuts, it means money goes from programs that help average Americans directly into the pockets of the 1 percent. When he reverses Obama's student loan reform, it means billions of dollars taken from the pockets of students and given to the big banks. When he approves the Keystone pipeline, it means more gas money from your wallet going to the oil companies. When he loosens environmental regulations, it means more profit for polluters at the expense of your health.

When Obama says we can't afford to go back to the policies that got us into this mess, he's talking about this reverse-Robin Hood redistribution. He's talking about the central cornerstones of Romney's strategy -- lower taxes for the rich (excuse me, "job creators"), and eliminating regulations. We don't have to go far back in history to find the last president to champion lower taxes on the rich and fewer regulations. His name was George W. Bush, and he presided over the worst job growth in recent memory. If you want to double down on this investment strategy, by all means, you should vote for Mitt Romney on November 6th.

But the smart money is on Obama.

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