1 Perspectives on the Economy, Economic Policy and the Election Michael J. Boskin Tully M. Friedman Professor of Economics Senior Fellow, Hoover Institution Senior Fellow, SIEPR Stanford University SIEPR Stanford University September 24, 2012

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Obama vs. Romney Economic Policies I ObamaRomney SpendingImmense increase in first term to 24% of GDP; no long run control Gradually decrease to 20% of GDP EntitlementsNo change to Social Security; No proposals on Medicare; Vague statements considering possible reforms later Raise retirement age; Change indexing; Premium support option in Medicare TaxesRaise rates on capital gains, dividends, wages, etc., more at the top; Budget implies huge increase in future tax rates; Higher corporate taxes, e.g. on deferral; vague corporate reform Reduce personal rates 20%; Broaden base; Reduce corporate rate to 25%; adopt territorial system; zero on capital gains and dividends below $250K income Deficits Record post-WWII; abandoned even long-run goal of balanced budget; ignored own Simpson-Bowles Limit to 1.5% of GDP by end of 1st term; long-run goal of balanced budget 8

Obama vs. Romney Economic Policies II ObamaRomney Debt Will have doubled debt/GDP ratio by next year; long-run explosion (chart) Gradually reduce debt/GDP ratio Trade No leadership on Doha Round; Delayed but finally put up 3 FTAs; TPP Aggressive trade liberalization (FTAs, etc.); China Regulation Aggressive expansionMore cost-benefit analysis; repeal and replace Obamacare, Dodd-Frank Energy Permitting way down; blocked Keystone; Green energy industrial policy Environmentally careful expansion of ALL economic sources, no industrial policy Monetary Policy Supportive of Fed actionsSays he would not reappoint Bernanke 9

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