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Romney’s Opportunity in South Carolina

Prof. Peter Morici - 1/11/2012

After a convincing victory in New Hampshire, South Carolina offers Mr. Romney the opportunity to become the presumptive Republican nominee and define the issues for the fall campaign.

For his GOP opponents, South Carolina posses the last good opportunity to break Mr. Romney’s momentum. Without better showings than in New Hampshire, his rivals will be challenged to raise enough money to be effective in Florida, which is an expensive state to contest. Primaries and caucuses that follow—Nevada, Arizona and Michigan—are likely more favorable to Mr. Romney.

South Carolina has a large concentration of Evangelicals and other conservative Christians suspicious of Romney’s positions on abortion and gay marriage, and Tea Party supporters who find Romney’s Massachusetts health care plan too remindful of Obamacare.

PACs backing Romney opponents will flood the airwaves with ads decrying Romney’s shifting positions on social issues and health care, and attacking his claims that his private equity firm, Bain Capital, created 100,000 jobs rebuilding companies like Staples, Domino’s Pizza and Sports Authority.

He would better off staying above the fray on social issues. Simply, President Obama will enjoy an advantage in the general election if Mr. Romney tries too earnestly to answer those claims, because most voters, nationally, would prefer the government not legislate morality and stay out of their bedrooms. However, unemployment is 10 percent in South Carolina—that provides Mr. Romney with an opening to refocus the immediate contest and define the debate for the fall campaign.

Romney’s claims about Bain Capital are silly—private equity funds purchase and shapeup for resale companies that are often overstaffed, or that should simply be broken up to release value. The net impact on employment of all Bain’s activities could not be largely positive, and it was a major tactical error for Mr. Romney to point to his experience at Bain as evidence that he is a jobs creator.

Instead, Mr. Romney should tackle the big issues responsible for slow growth and high unemployment that have been identified by Mr. Obama but that the President has failed to remedy.

Repeatedly, President Obama has cited China’s undervalued currency and unfair trade practices as slowing U.S. growth, and the need develop more domestic energy.

As a candidate in 2008, the President promised strong action but has since only pleaded with China—to the point of national embarrassment—and obtained few meaningful results. Mr. Romney has proposed a tax on Chinese imports to push Beijing to change.

On oil, the President funded alternative energy projects while shutting down most offshore drilling. Solyndra was a fiasco, and solar and wind power will not significantly replace oil—imported or domestically produced—for another 20 years. Mr. Romney wants to accelerate domestic exploration and development, and with oil at $100 a barrel, the United States could become a net petroleum exported again within ten years.

President Obama’s health care reforms are increasing the premiums and co-pays, and bankrupting the federal treasury. Mr. Romney sensibly understands it is better to distribute resources and responsibilities to the states and let them develop alternative approaches. Most states don’t like his Massachusetts health care—fine, Mr. Romney doesn’t pretend to know what’s best for everyone on health care, energy and just about everything else, unlike the present occupant of the Oval Office.

Wall Street abuses did much to thrust the U.S. economy into the Great Recession, but the cure has been worse than the disease. Dodd-Frank, championed by President Obama, encourages large Wall Street banks to acquire smaller regional institutions, who are flummoxed by the quagmire of new federal regulations. This concentrates control of most U.S. bank deposits among a handful of the largest financial institutions on Wall Street, and limits lending to small and medium-sized enterprises that create the most new jobs.

Fixing the banks may be the toughest challenge for Mitt Romney—a man made wealthy by big bonus finance. However, among all candidates, he should know best how to slay the beast eating American capitalism—Wall Street finance. He needs to tell voters what he would put in place of Dodd Frank, not just that he wants to repeal it.

In South Carolina, Mr. Romney can score a big victory and put the President on the defensive for a poor economy by explaining what’s broke and how his approaches to trade with China, energy, health care, and banking will get the economy going again.

Transforming Romney from Contender to Champ

Iowa doesn’t pick presidents, it simply winnows the field. It’s too prosperous to provide an adequate test of which GOP candidates can prevail in more economically challenged primary states and the general election.

With New Hampshire also prosperous and fairly safe for Mr. Romney, the South Carolina and Florida primaries on January 21 and 31 offer him the opportunities to prove he has what it takes to solve the country’s problems and score convincing victories.

In both those states, unemployment is 10 percent, as opposed to less than 6 percent in Iowa and New Hampshire. Mr. Romney must do more than chant the Republican catechism—less taxes, less government and less regulation—because all the candidates are doing the same in one fashion or another. He must explain to voters what’s broken—how Mr. Obama’s policies are holding back growth and jobs creation—and outline how he will fix those things.

Moreover, after George W. Bush bequeathed to President Obama the economy in dire straights, in the general election, the Republican nominee cannot simply fall back on the catechism without becoming too vulnerable to Mr. Obama’s claim that all the Republicans care about is enriching the rich and returning failed policies of the past.

In Iowa, the economy was not enough the focus of discussion. Caucus goers divided between 25 percent who picked Mr. Romney because he is perceived to be “most electable,” and 75 percent who splintered among a flock of other candidates who fashioned themselves “true conservatives.” Each offered their own flavor of conservatism, and Rick Santorum—the least vetted and vulnerable—essentially tied Romney.

Romney demonstrated considerable strength among voters earning more than $100,000 a year, and the candidate with the most unrealistic and maddening platform, Ron Paul, finished a strong third by drawing significant support from those earning less than $50,000.

Therein lies Mr. Romney’s challenge—folks earning more than $100,000 don’t need a better economy nearly as much those gravitating to Mr. Paul’s bazaar prescriptions, which includes shutting down the Federal Reserve and returning to the gold standard.

Mr. Romney has a solid platform. Unlike President Obama, he understands nothing is much wrong with what Americans can do and make, but unbalanced trade with China and costly imported oil are sapping too much demand—sending too many consumer dollars abroad to pay for imports that don’t return to purchase U.S. exports, and slowing growth. And high health care costs, and new financial regulations that don’t curb bank abuses but have shut down lending for most business expansion, make investing and creating jobs in America too difficult and expensive.

Mr. Romney’s principal challenges are that too many primary voters who pick the Republican nominee like simple conservative orthodoxy—get the government out of my life—but moderates who made Mr. Obama president and Mr. Romney must win in November don’t drink that Kool Aid.

And, conservative pundits, such as editorial writers at the Wall Street Journal and George Will, endlessly ridicule Mr. Romney’s economic program for having 59 points instead of three—lower taxes, less government and deregulation—and are denying him an honest assessment from analysts who should be sympathetic toward his quest for the presidency.

As things stand, Mr. Romney, in the general election, would have to contend with both Democrats in the media sympathetic toward Mr. Obama’s big government philosophy, and Republicans in the media who think too much like Republican primary voters and can’t accept that something more nuanced than conservative orthodoxy is needed to right the country.

To turn his 25 percent plurality in Iowa into convincing wins in South Carolina and Florida, and beat Mr. Obama in November, Mr. Romney must concisely and accessibly explain how Mr. Obama’s passive response to Chinese protectionism, limits on oil and gas development, expensive health care mandates, and quagmire of bank regulations are strangling American capitalism. And how his program can quickly turn things around. His 59 points already have most of it, but now it is time for the executive summary and eloquent delivery.

That will take courage for Mr. Romney to recognize, and skill for him to convince voters that simply berating Washington is not enough. The world is too complex for the government of Rutherford B. Hayes, but surely safe enough for an America that relies on entrepreneurism and accountability, and not command and control, to prosper and grow.