Romney and the 6 Percent Solution

Romney and the 6 Percent Solution

By Carl M. Cannon - May 29, 2012

Mitt Romney promised last week, and not for the first time, that the U.S. job market would improve significantly if he is elected president. In interviews with FOX News and Time magazine, the presumptive Republican presidential nominee went further than usual in providing a precise figure: If he is elected president he’ll bring the nation's unemployment rate down to 6 percent by the end of his first term in the White House.

If Romney were to be elected -- and managed to deliver on such a promise -- he’d more than likely be rewarded with a second term. But his pledge, offered with few specifics, raises significant questions, three in particular:

First, is the unemployment rate going to drop anyway, of its own accord, regardless of who is elected in November?

Second, assuming this won’t happen automatically, is Romney just engaging in idle campaign trail talk designed to counter President Obama’s attacks on his time as the CEO of a Boston-based venture capital firm -- or does Romney really have a plan that could achieve such results?

Third, what is that blueprint, and can it work?

Will It Happen Anyway?

Most long-term economic forecasts have the jobs picture improving gradually for the next few years. The non-partisan Congressional Budget Office has predicted that the unemployment rate will average 6.3 percent in 2016 -- the year that would be the end of Romney’s first term in office (or Obama’s second).

Citing this CBO estimate, Democrats and an array of liberal commentators were quick to accuse Romney of essentially promising nothing that wasn’t going to occur regardless of the outcome this fall. And Obama’s campaign aides went further, accusing Romney of backing away from earlier pronouncements about 4 percent unemployment being the true goal.

“Government economists have been clear that under current law their projection today is that unemployment will hit 6 percent by that point,” said Obama campaign spokesman Ben LaBolt. “Romney moved the goal post in just a matter of weeks. He said that he was going to get it down to 4 percent several weeks ago. Now he’s at 6 percent.”

There are a couple of problems with this critique. For one thing, Romney never made any kind of “promise” to reduce employment to 4 percent. What Romney did do, in response to administration officials’ heralding a recent drop in unemployment from 8.2 percent to 8.1 percent, was say that “anything over 4 percent is not cause for celebration.”

More significantly, the CBO has a recent track record of inaccurate economic projections. Its statutory obligation is to provide nonpartisan baseline budget projections to Congress. This is not something it can accurately do without knowing the exact nature of future changes in federal tax policy -- as well as what’s happening in the rest of the economy. This is a challenge for all economic forecasters because the two greatest variables in determining the size of the annual budget are two unknowable factors: future tax rates and the raw amount of money paid in taxes by working Americans.

In an effort to provide Congress guidance, CBO runs economic models based on hypothetical congressional actions, such as letting the Bush-era tax cuts lapse after 2012, a step which is plausible but uncertain. Even then, if CBO’s models are to be of any use, they must predict future employment rates. But its recent track record in this regard has not been impressive.

In a March 2009 evaluation of the effect of the current administration’s $787 billion stimulus package, for instance, CBO predicted that unemployment in 2012 -- this year -- would already be in the 6 percent range.

The administration was also overly optimistic: In its September 2009 “mid-session review,” the White House Office of Management and Budget estimated that the unemployment rate would be 6.5 percent by 2013, a number no one in the administration is currently using.

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Carl M. Cannon is the Washington Bureau Chief for RealClearPolitics. Reach him on Twitter @CarlCannon.

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