There are only three presidential candidates left: President Barack Obama, presumptive GOP nominee Mitt Romney, and GOP congressman Ron Paul. Each candidate's economic plan has its strengths and weaknesses, but President Obama will provide the most competent economic management of the three, especially given our current economic rut.
Strengths. When an economy is operating below its productive capacity, cutting spending and raising taxes is a bad idea. As Keynes said, the time for austerity is the boom, not the bust. Making large spending cuts now would probably make the long-run budget problems worse. Relative to the other candidates, Obama would forestall large spending cuts or tax increases until the economy gets back to capacity.
Obama would also make investments in infrastructure, like revamping the electric grid and high speed rail, and education, such as universal preschool or large subsidies for public colleges and workforce training. These investments would increase the prospects for long-run economic growth. Moreover, by addressing short-run economic problems we face, Obama would make the long-run situation better, too. When potentially productive workers are unemployed for a long time, they lose skills or drop out of the workforce altogether. Consequently, the economy’s productive potential drops.
Obama is also the most committed of the three to making the investments in basic research and development that will increase productivity and technological advancement in the future.
Weaknesses. While Obama is for cutting the corporate tax rate and closing tax loopholes, he focuses too much on special exemptions and subsidies for manufacturing and energy, costly programs that reduce efficiency and global trade. Obama has also put the Keystone pipeline on the shelf for environmental reasons, infrastructure spending that would put Americans back to work and help the economy.
Strengths. Mitt Romney has some positive ideas for long-term economic growth, such as privatizing Amtrak, streamlining regulatory processes, and building new nuclear reactors. Like Obama, he would continue investing funds in basic research and development through a research and development tax credit, and would move funds currently going to subsidize clean energy companies and products into basic research, a more effective strategy from promoting clean energy.
Romney would also prioritize opening new free-trade agreements to increase the size of American businesses customer base. He would also increase the current caps on visas for high skilled workers, especially those with degrees in STEM fields: science, technology, engineering, and mathematics. This would encourage entrepreneurship and economic growth.
Weaknesses. Romney’s biggest weakness is his failure to take the short-run economic crisis seriously, likely resulting in more unemployed workers and economic stagnation for years to come. To finance Romney’s promised further tax cuts for wealthy Americans, who have the most insulation from the depression we’re in, he will cut investments in education and infrastructure, which will hinder long run growth.
Romney will ramp up spending on the military, which will promote employment in the short run, but won’t bring us the same positive effects on long run growth that spending on education or infrastructure would.
Strengths. Paul would cut the corporate tax rate from 35% to 15%. By decreasing the costs of doing business, the rate cut would inject more money into the economy and businesses, particularly large corporations, would be able to hire more workers.
Weaknesses. Ron Paul’s plan would immediately throw the economy into a recession, mostly because it does too much too fast. By one estimate, Paul’s plan would increase the unemployment rate by 3 percentage points, increasing the number of unemployed workers from 12.8 million to 17.4 million. Though no independent assessments have been conducted, the decreases to in the productive capacity that result would likely offset much of the budget savings that come from cuts to federal spending.
By turning Social Security, veterans’ benefits, and Medicare into voluntary contributions programs, Paul would inflict even more suffering on poor and elderly folks.