Daring Depravity

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Mitt Romney turns the screws

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Mitt Romney’s strength is often touted as a business expert, who works wonders and is a efficiency expert.  But really his expertise can be boiled down to just one idea: cut costs.  This is his solution for every problem that exists in business and government.  Pay less for things, do it cheaper, pay workers less, get lower rents, and so on.

Having run a business, I can say that it is obvious that cost control is really important.  Don’t pay more than you need to, don’t pay for things you don’t need, and watch the overhead.  While this is all true, this totally neglects the fact that increasing revenue is just as important if not more important than cutting costs.

Once you are buying your office supplies cheaply, paying as low a rent as possible, and you negotiate the best deals with suppliers, you’ve cut almost as much as you can.  Then what?

Lets take the example of a pizza shop.  If a pizza costs $2.00 to make, and you sell them for $12.00, that is a profit of $10.00 per pizza.  Business expert Mitt Romney would come in and say, use less cheese, buy cheaper ingredients, pay your workers less, get cheaper insurance, etc.  After all of this, the cost per pizza goes down to $1.00, and the profit goes up to $11.00.

The failure in this logic, when applied to business and government, is that this approach never factors in the value of increasing revenue!  Using the example above, instead of cutting all of the corners to make an extra dollar, why not just sell one more pizza?  That increases revenue, increases profit, and increases your business.  Growth is important in business, not just cost controls.

But in Mitt Romney, and the Right Wing’s single minded focus on debt and costs, no growth can ever be planned for.  Sure one way to increase the bottom line is cutting things, but that has a diminishing return which eventually bottoms out.  Then what?  Usually for Mitt Romney, at that point he gets paid, and moves on to another company to sell them his same cut costs snake oil.

A real way to grow a business involves investing, putting money in to receive a return.  If the business has growth potential, it needs capital and investment to expand.  This leads to growth, higher revenue, and potentially higher profits.

It is fitting that Mitt Romney would bring this same prescription to government, if elected President of the U.S.  He and Paul Ryan and a Republican Congress would try to cut their way to balance, but their cuts are so extreme that the possibility of growth in the future would be destroyed.  Revenues would never increase, and we would see years of stagnant and almost nonexistent growth.

Romney’s entire analysis of government deficits and social insurance programs overlooks one simple fact: the main driver of deficits and increased costs of insurance programs is unemployment.  In order to reduce tax deficits, more unemployment needs to get lower through job creation.  With lower unemployment comes increased revenue from taxes.  The same is true of other programs.  With more people working, there are less people needing benefits from medicare, medicaid, and other programs.

We cannot cut our way to solvency, nor should we. One trick pony Mitt Romney might think we can, and if he wins, he will try, but it will not work.  And unlike in private industry, there is no other country to move on to after he ruins this one.

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October 14th, 2012 at 12:54 am

Seniors Boo Paul Ryan

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“I had a feeling there would be mixed reactions,” Ryan told the crowd.


Also, from the same article, Democrats might have figured out how to explain the concept of social insurance they claim to be in favor of (yet seem to be eager to cut also):

“Given the conversations that have been out there in the political arena lately, I want to emphasize Medicare and Social Security are not handouts,” Obama said. “You’ve paid into these programs your whole life, you’ve earned them.”

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September 21st, 2012 at 11:09 pm