Making The Sale

Democrats are drawing a deep sigh of relief this morning.  President Obama showed up last evening in his second debate with Mitt Romney.  Finally the President went toe to toe with Romney calling him out on each and every issue where facts differed from speech.  As in a heavy weight fight, continued blows to the body take their toll.  Last evening, Romney took some good punches and showed it.

Romney again promised to lower everyone marginal tax rate by 20%.  President Obama helped the audience understand the math and the impossible task of offsetting $7-8 trillion in cuts without raising the deficit or increasing taxes on the middle class.  No details or even hints emerged from Romney on how he could fulfill his promise.

Romney’s boast of “I know how to create jobs” began to sound questionable when Romney talked about unemployment numbers, the price of gasoline and GM.

He claimed that under President Obama unemployment is the same as when he took office.  Said quickly this line might work but when the President counter punched reminding everyone that in 2009 when he took office the economy was in free fall.   The real starting point and point of comparison for President Obama is more like 10+%.

Other Romney charges like the price of gasoline or the bankruptcy of GM were similarly beaten back.  A President has virtually no impact on the price of gasoline.  The low gasoline price when the President took office is tied to the world recession not the President’s power.    The Obama Administration rescue of GM allowed GM the time and space to undergo a structured bankruptcy by providing government cash to keep the doors open.   Under Romney’s recommendation, GM would have had to shut down because it would have lacked the necessary operating capital.

Probably the most clear advantage for President Obama came from the fact that he simply stood up and defended himself while calling out Romney’s misinformation.

So, is it a done deal?  Will President Obama now win?

It is too soon to predict.  President Obama did not make any arguments last evening why we should expect his second term to be much different from the first.  The President also did not paint any picture about how he would deliver his promises and reduce the deficit.  There was no discussion of how the country could get control of health care costs, fund Medicare and Medicaid without borrowing, and put a fix on Social Security.

It is relatively easy to project the impact of Mitt Romney’s 20% tax reduction and subsequent budget plans, There would need to be significant reductions in health care benefits (private plus Medicare/Medicaid) or a lot less people would be receiving them, or both.

Similarly, the President proposes to continue current entitlements without increased taxes (beyond the millionaires).  This won’t work either without some changes to entitlement benefits or more taxes.  The math works both ways.

Last evening seemed to indicate that the President can show voters that Romney’s arguments have no clothes.  It is also looking like voters want something more from the President in return for their vote.  Why will the second term be different?

The problem facing President Obama is the same problem that has driven Mitt Romney to change his policy promises in the final weeks of the election.  It is possible to grant 20% cuts in tax rates and grow the economy thereby creating more jobs.  It just turns out that unless the deficit is allowed to mushroom (which Romney says he won’t allow), there must be steep cuts to government expenditure (read entitlements).

The President’s problem is that even with tax increases on the wealthy, keeping entitlements as they are now projected, large deficits will continue.  Entitlements must be modified (like in means testing) or new taxes are introduced or both to make the deficit shrink.  It’s the math.

My guess is that the last debate will be about “who can you believe”.  Both candidates lack a real platform where the numbers add up.  Maybe the argument will come down to which candidate is telling the smallest exaggeration.

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