A Proposition for Office

Mitt Romney, presidential candidate and former Governor of Massachusetts, puts forth an economic policy dubbed “The 59-Point Plan”.   Romney is firm in the belief that the private economy will inexorably produce millions of new jobs when it resumes growing at 3% or more.  Therefore, Romney intends to cut the top corporate income-tax rate to 25% from 35%, due to the common bipartisan consensus that the United States’ current rate hurts American companies.  According to the Wall Street Journal, the former governor proclaimed he favored “tax reform with lower individual tax rates”, but only “in the long run”.  On spending, Romney would set a cap on spending over time at 20% of the total GDP.  Yet, he is unclear about what sections of spending he would be cutting except for nonsecurity domestic programs.  Specifically, according to the same article, Romney’s rollout centers on “jobs and economic growth”.  Romney hopes to devitalize most of the capital gains tax cut’s economic impact by only affecting those who earn less than $200,000 a year.  He ultimately anticipates the allocation of funds to another portion of the economy will help foster expansion.  Romney’s proposals open a conduit for free trade and expanded choice in the market, but at a large cost of reduced governmental funds and confidence in governmental investment.    The candidate’s potential policy “contains a number of options for incremental entitlement reform” without the overbroad condemnation of Social Security.  With increased tax reductions, Romney aims to aid in the elimination of economic inefficiency in the overall market by constricting dead-weight loss.  Essentially, Romney calls for tax breaks not extreme as Perry’s, but potent enough to have influence over the economy.

Information taken from “Romney Unveils Pro-Business Economic Plan”, The Wall Street Journal, 2011

Conflagrations in the Euro Zone

   Even as the euro zone speeds towardsa potententially disasterous crash, most people are assuming that a miracle will occure because European leaders will do whatever it takes to save the single currency.  A euro break-up would inevitably cause a global bust worse even than the one in 2008-2009.  The world's most financially integrated region would surely be torn apart by defaults, bank failures, and the imposition of capital controls.  The odds of a miracle recovery are dwindling fast.
    Most of the cause stems from the fact that panic has rapidly proliferated across European banks.  Their access to wholesale funding markets has almost completely dried up, ensuring minimal to no economic profit.  As banks refuse to lend to each other and large national firms begin pulling deposits from peripheral countries' banks, these acts of blatant fear lead many to believe hope is becoming lost.
    "The Economist" predicts due to the collapse in business and consumer confidence, there is little doubt that the euro zone will see a deep recession in 2012, with a possible fall in output as much as 2%.  Past fiscal crises show that the only further prevention of this downward spiral comes from bold policies to regain market confidence.  The only institution that can provide immediate relief id the ECB.  Vast monetary loosening should cushion the recession and buy time.
    However, the future of the Euro Zone looks exceedingly bleak.  As many companies expeirence a temporary shutdown in the short-run, even the most skilled economists can not truly accurately predict what will happen to the euro zone.  Only time will tell.

Information taken from 'Is this really the end?' -- "The Economist" December 2011