Romney's fiscal record as Massachusetts governor stands up better than Obama's fiscal record as U.S. president. Agree or disagree?

June 12, 2012 4:00 A.M.

By Patrick Brennan

The Obama campaign
has recently resorted to a peculiar tactic: putting forth the current
president as a paragon of fiscal conservatism and deriding Mitt Romney
as a profligate executive. The source of this criticism suffices to
discredit it, but the details of Romney’s fiscal record add to the
evidence in Romney’s favor. They stand in stark contrast to President
Obama’s meager accomplishments these last three and half years.

When Mitt Romney took office as governor of Massachusetts in 2003,
the recent recession had hit Massachusetts particularly hard, leaving
the state’s budget in tatters. But the governor faced a deep-blue
wastrel of a legislature that expected more government whenever it
pleased.

His predecessor had left him, even after huge tax hikes, a $450–$600
million budget deficit remaining in the fiscal year. Knowing that the
legislature would push for tax increases instead of spending cuts,
Romney won more expansive “9C” budgetary powers from the legislature, enabling him
to make midyear reductions in areas that previous governors couldn’t
touch, such as Massachusetts’s $5.5 billion in local-government aid.

By contrast, in Barack Obama’s first full fiscal year in office, he faced a projected deficit of $1.186 trillion. His 2010 budget, rather than beginning to close that gap, instead expanded
it, running a deficit of $1.29 trillion, which increased the federal
debt by 12 percent of GDP in one year (despite revenues that were
greater than expected).

In order to close the gap, Romney made cuts in almost all areas of
state government. He cut health-care spending, closed obsolete state
offices, and consolidated redundant departments and cabinet agencies.
However, facing a huge deficit, a veto-proof legislature, and billions
in mandatory spending, Governor Romney
also had to raise some revenues. He did so mostly by increasing fees,
rather than tax rates, to the tune of $501 million. As an Urban
Institute study puts it,
“There was no new borrowing, pension recapitalization, or securitizing
of tobacco revenues — which the administration disdained as ‘fiscal
gimmicks.’”

Many of the increases were merely sensible: for instance, raising
greens fees at state golf courses and charging higher rents for highway
billboards, prices that hadn’t changed in years. Some of these fees, as
critics on the right and left have argued, of course fell on the
ordinary, middle-class taxpayers (golfers are people, too), but such is
the case for any form of government-revenue increase, especially at the
state level, where taxes tend to be flatter.

Many anti-tax zealots, including Romney’s Republican-primary
opponents, have also criticized fee hikes as back-door tax increases,
but they are preferable to tax-rate increases. Fee hikes work far better
than increases in income-tax or corporate-tax rates because they don’t
distort incentives as significantly, and they pose less of a threat to
businesses that are assessing a return on investing in the state. Romney
also closed a variety of business-tax loopholes in order to raise
revenues — again, a method much preferable to raising marginal rates.
It’s worth comparing how Romney managed his budget crisis with the
methods favored recently in California and Illinois: Tax rates have
increased substantially in these two states, scaring away investors
while barely improving the states’ fiscal picture.

Romney’s record of fiscal discipline continued throughout his tenure
as governor. After his cuts for FY 2003, government spending did rise
eventually, though he managed to cut it again in real terms from 2004 to
2005. Between 2004 and 2006, in fact, Massachusetts’s economy rebounded
so energetically that even in years when the state increased spending,
it also ran a surplus, allowing the state to shore up its “rainy day”
stabilization fund, a key element of state fiscal stability.

The orthodox fiscal-conservative Club for Growth has criticized
Romney for “loosening the purse strings” after the 2003 budget crisis
had been resolved. However, this spending was the result of the rapidly
improving revenue situation: In a nod to the happy days, the legislature
overrode even more of Romney’s spending vetoes than they had before.
Overall, Club for Growth praises Romney for enforcing “much-needed
fiscal discipline,” keeping the rate of spending growth to 2.22 percent,
well below the benchmark of population growth plus inflation.

The Obama campaign has also attempted to assail Romney’s record on Massachusetts’s debt burden:
“Massachusetts’s long-term debt increased by 16.4 percent or $2.6
billion over four years. His legacy was that Massachusetts had the
highest per capita debt for any state in the nation by the end of his
tenure.” Let’s put aside that this criticism comes from a president who
has, in three years, increased the federal government’s debt by about 50
percent, or almost $5 trillion. In fact, while Obama’s tenure has seen
the federal debt increase from 60 percent to 100 percent of GDP, Massachusetts’s debt burden barely budged, rising from 16.3 percent to 19.4.

Further, Massachusetts’s state debt,
thanks to decades of profligate governments, is very nearly an
intractable problem. Unlike most states, the Massachusetts state
government issues a significant amount of debt on behalf of local
governments, a policy that’s arguably reasonable so long as the state
government maintains its ability to borrow more cheaply than local
governments, as Massachusetts did during Romney’s tenure.

Moreover, much of the Bay State’s debt burden isn’t the result of
spending that Romney or any other governor could afford to rein in; it’s
the aftermath of the Big Dig boondoggle. Most of the overruns for the
infamous Boston public-works project fell upon the state government,
rather than the federal government, which originally provided much of
the funding. This has burdened the state with huge amounts of very
long-term debt and interest payments of more than $100 million per year.

Romney, to the extent possible in Massachusetts, also attempted to
tackle the state’s long-term fiscal problems: He fought tooth and nail
to raise the amount that state employees had to pay toward their
health-care benefits, eventually prevailing; he also updated
Massachusetts’s welfare system to follow Clinton’s welfare reforms,
which a series of waivers had allowed the Bay State to ignore.

The contrast between the two executives is perhaps starkest when you
consider this: President Obama oversaw the first credit-rating downgrade
in the history of the United States, to AA+, while Governor Romney
convinced the three ratings agencies to lift his state’s credit rating
one notch, to AA, citing a basically balanced budget, stronger revenues,
and a larger stabilization fund. (Further, and thanks in part to the
fiscal reserves Romney set aside, his successor, Deval Patrick, has seen
the state’s credit rating raised to AA+.)

A downgrade is not necessarily a fiscal death knell; since the
federal government’s downgrade, yields on federal bonds have fallen
rather than risen. But that is due to a range of exogenous factors,
unrelated to this president’s fiscal plans, or lack thereof. Ratings
agencies assess the size and trajectory of a government’s obligations
and its ability to meet them. President Obama has been found wanting in
this respect, to America’s detriment; Mitt Romney proved himself capable
of such discipline, to the Bay State’s benefit.

— Patrick Brennan is a William F. Buckley Fellow at the National Review Institute.