Jobs, Taxes, and the Republican Primary

Economic factors are always paramount in presidential elections.  But in a year when the unemployment rates remains above 9% and the Eurozone debt crisis looms, the importance expands exponentially.  With the first Republican primary less than two months away, each of the potential candidates has outlined a tax and jobs plan that will, according to them, bring the United States out of this recession and restore it to its once great position as the only viable superpower.

Mitt Romney, the unflappably stagnant former governor of Massachusetts, introduced his 49 point jobs plan last month in Las Vegas.  It entails cutting corporate tax rates from 35% to 25%, eliminating the estate tax, and extending the so-called Bush Tax Cuts.  He also recommends reducing the regulatory burdens on business by repealing Obamacare and Dodd-Frank (the financial reform bill) and expanding drilling in areas such as the Gulf Coast, the Plain States and Alaska. 

Texas Governor Rick Perry, the unflappably flappable candidate, introduced his tax and jobs proposals in recent weeks.  His jobs plan focuses mainly on increased energy production in oil and natural gas which he states will “unleash 1.2 million American jobs through safe and aggressive energy exploration at home.”  His tax plan proposes creating an opt-in flat tax, meaning those who choose to do so, can have their taxes reduced to a flat rate. 

Former Godfather Pizza Executive Herman Cain, the ever-present attention seeker, has infamously proposed his 9-9-9 plan to reform the tax code.  It would throw out the existing tax code and replace it with a 9% corporate tax rate, 9% individual income tax, and 9% national sales tax.  Cain has not explained his plan much beyond that except to say that his advisors have crunched the numbers and it will be deficit neutral.

Former Utah Governor and Ambassador to China Jon Huntsman (disclaimer, I volunteer on Huntsman’s campaign) has proposed a tax and jobs plan that synthesizes many aspects of Romney, Perry and Cain’s proposals.  He calls for tax reform in which loopholes and deductions for corporations and the rich are eliminated and the base is broadened.  The corporate tax rate would then be reduced from 35% to 25% and the personal income tax would be reduced to flatter, fairer rates of 8%, 14%, and 23%.  He has also called for expanded oil and natural gas exploration, regulatory reform, free trade expansion, and stronger relationships with foreign nations.

Other candidates have made various similar and sometimes outlandish proposals.  Rick Santorum, has proposed cutting the tax rate for manufacturing to 0%, an interesting thought.  Ron Paul has proposed eliminating the Departments of Education, Commerce, Energy, Interior, and Housing and Urban Development.  Michelle Bachmann has not been able to formulate a sentence that does not end with “repeal Obamacare.” 

Many of these proposals are seriously flawed.  Romney’s tax plan leaves the existing tax code, loopholes, deductions, and all, in place allowing for companies like GE to continue to make billions of dollars and pay no income taxes.  Perry’s tax plan also leaves the existing loopholes and deductions in place because those benefiting from them will not choose to opt-in to the proposed flat tax.  Cain’s plan is simply simplistic; as a tax lobbyist I spoke to recently put it, “I have serious questions about a tax policy that can be summed up in a catch phrase.”

 Santorum’s proposal concerning tax rates on manufacturing is intriguing but has little chance of success in Congress.  Paul’s proposals are simply ludicrous; maybe in a perfect world we could do away with five Executive Agencies and be fine, but that is not this world.  Huntsman’s jobs and tax plan was called “big and bold” by Reuters and “as impressive as any to date in the GOP presidential field, and certainly better than what we’ve seen from the front-runners.”  Because of my stake in the Huntsman campaign I will let you decide for yourself.

What is clear is that the Republican candidates for president have displayed many similarities and many differences in these proposals.  The distinctions may seem minute, but they are clear and integral in this time of economic woe.  The candidates now have approximately eight weeks to distinguish themselves from each other and from President Obama.  It should be interesting to watch.  

Winners and Losers from the GOP Presidential Debate

Wednesday night’s debate was the much anticipated debut of newly crowned Republican front runner Rick Perry.  From the beginning, two things became obvious.  First, it is not only the press but the rest of the Republican field that views Perry as the frontrunner, evident by the constant barrage of criticism from the other candidates.  Second, the main competition, for better or for worse, is and will continue to be between Perry and Mitt Romney.

From the get go, Romney and Perry engaged in a political pissing/spitting contest about their records as governors and their plans for job creation.  Perry touted his record as the 4^th ranked job creator among governors in the United States and Texas’ record as the top job creating state during the current recession.  He then criticized Romney’s record as the 47^th ranked job creator among US governors during his tenure.

Romney responded by explaining the difficulties the state of Massachusetts faced at the start of his term and the positive steps he took as governor, creating jobs at a faster rate than the national average.  He also touted his private sector experience in creating and optimizing companies around the world.  He then pointed out that a large percentage of the jobs created in Texas are the result of their surplus of natural resources, not Perry’s policies or leadership, and that Texas has the highest rate in the country of jobs at or below the minimum wage. 

Jon Huntsman, the former governor of Utah and perennial voice of reason, chimed in that Utah was the 1^st ranked job creating state during his tenure, but that did not detract from the Romney/Perry rivalry. 

By the end of the debate, the hierarchy of candidates became much more clarified.  Romney and Perry maintained and even solidified their position as the top tier of candidates.  Considering the setting and the crowd, they both presented strong arguments in favor of conservative positions on jobs, immigration, health care and defense.  They were both winners of the debate and will now attempt to spin the results more in their own favors using it as a springboard to future debates and appearances in Iowa, New Hampshire, South Carolina and around the country.

Michelle Bachmann and Ron Paul presented strong arguments but failed to make a statement in terms of policy positions or memorable rhetorical flourishes.  Both, in my opinion, did more harm than good.  Paul further reduced himself to the periphery by arguing that the FDA, TSA and Air Traffic Control are unnecessary government agencies.  Bachmann was simply outshined in her conservative, Tea-Party message by Perry who is now funneling her support to his own campaign.

Rick Santorum and Newt Gingrich are most likely on the verge of dropping out of the race.  They simply do not have the financial and electoral support to continue the rigorous process of campaigning for elected office.  Gingrich, by making multiple attempts to claim unity among the candidates and defend against supposed efforts by the media to divide them, gave off the impression that he was above criticizing his fellow candidates and ready to get behind the eventual nominee.  This is not the attitude a real player in the Republican primary should have.

The two remaining candidates, Jon Huntsman and Hermain Cain, are both polling in the low single digits but made positive strides on Wednesday night.  Cain articulated coherent policy positions (whether or not they would be beneficial or passable is another story) and Huntsman continued to position himself as holding the rational middle ground.  Unlike some of the other candidates, however, Huntsman sounded more presidential; he did not stoop to the personal attacks and criticisms like the other candidates did and he made real, useful references to his past experiences as Ambassador and government official in four presidential administrations.  Because of the financial support both maintain, they are likely to remain in the race at least through the New Hampshire primary and have the potential to gain support in the next few months.

Very little was said in the debate that was at all novel.  It was simply part of the process of whittling down the field and creating a coherent message for the coming months.  Tonight is the Democrats’ turn, with President Obama giving his jobs speech, but it’s also opening night for the NFL…

What Did the Ames Straw Poll Accomplish?

On Saturday, a small percentage of the Republican electorate in Iowa flocked to the little town of  Ames for an event with no real meaning but for which candidates have spent many millions of dollars.  Only once in the last thirty years—George W. Bush in 1999—has the winner of the Ames Straw Poll gone on to win the Republican nomination and the White House.

Some candidates, such as John McCain in 2007, skipped the Iowa Caucus altogether because of its reputation as an Evangelical litmus test.  McCain had also opposed the Ethanol Tax Credit during his career in the Senate which would have killed any chance he had in the Caucus.  Mitt Romney is at least partially following this path due to the fact that his New England persona and Mormon religion do not necessarily play well in Iowa. 

While the Straw Poll has very little substantive meaning, it did help to clarify and simplify the Republican primary race which can now be viewed in three tiers. 

The top tier of candidates is now made up of Romney, Michelle Bachmann and, as of his entrance into the race on Saturday, Texas Governor Rick Perry.  This is where the real action of the Republican primary will occur.  Perry and Bachmann will now compete for the votes of the ultra-conservative, evangelical, Tea-Party types while Romney will seek to portray himself as the businessman with a plan to fix the economy and a mainstream electability. 

The second tier of candidates will now look to either increase their exposure in Iowa, working towards the Caucus in February, or focus their attention on New Hampshire and South Carolina.  In reality, these candidates—Ron Paul, Newt Gingrich, and Jon Huntsman—have little chance of making much headway in the primary, although some, such as Jon Stewart, believe Paul should be getting more press.  Huntsman, due to his strategy from the beginning of focusing on New Hampshire and South Carolina plus his financial backing has the greatest chance of becoming a spoiler but that chance is still slim. 

Herman Cain, Rick Santorum, and Thaddeus McCotter round out the Republican candidates as the third-tier.  With little support and limited funds, these candidates will likely remain in the race through the Iowa Caucus in order to “get their message out” but with little chance of making any electoral headway. 

So what does this mean for the Republican Party and for the country?  With Bachmann and Perry jockeying for position as the Conservative thoroughbreds, the chances of unseating President Obama become slimmer and slimmer.  The majority of Republican Primary voters may agree wholeheartedly with the small-government, deregulatory, social conservatism of Perry and Bachmann but the majority of the American people do not—at least not to that extent. 

The further these candidates move to the right, the more difficult it will become for them to pivot naturally to the center in the general election making a general election victory all the more difficult. 

There is still a long way to go before the general election and circumstances can change drastically.  The economy and job market will be the major factor that decides the election of 2012 and Republican would do well to remember that.  A candidate’s perspective on the role and size of government or on abortion and gay rights can be important in a Republican Primary but will be dwarfed in the general election by the issue of jobs. 

The Straw Poll is over and there are now six months before the actual Iowa Caucus.  Anything can happen—maybe if we’re lucky Jon Huntsman can get a little more traction—but more likely the first tier candidates will continue in their barrage of Conservative talking points and anti-Obama rhetoric all the way to the Republican Convention in August.