Tags: romney | economy | stimulus | no | apology | book

Mitt Romney's Blueprint for a Strong Economy With 'No Apology'

Wednesday, 03 Mar 2010 10:03 PM

By Mitt Romney

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Former Massachusetts governor and 2008 presidential candidate Mitt Romney is offering a dramatic new blueprint for the nation to confront our most critical issues. Newsmax is pleased to present exclusive excerpts from Gov. Romney’s just-released book, “No Apology: The Case for American Greatness." In “No Apology,” Gov. Romney exposes how the Obama administration and even the Republican Party are failing to confront budget deficits, declining global competitiveness, a weakened military, inadequate healthcare, failing education, and our energy needs. In this exclusive excerpt for Newsmax.com, Gov. Romney discusses how to cure an ailing economy and get our education system back on track:

For the fifty years from 1950 to 2000, average U.S. housing prices, after inflation is removed, rose by less than one half percent a year (see graph on following page). The growth was remarkably steady over five decades. If the index for a home price in 1950 was 105, it had risen to about 120 by 2000 — again, taking out inflation. So, 15 points of growth in fifty years. Then suddenly, beginning near the year 2000, real home prices took off like a rocket. By 2006, the home price index was almost 200! That means about 80 points in six years — five times more price growth in six years than had occurred in the previous fifty years. No bubble like that has ever endured; it simply had to pop.

Who’s to blame? Well, just about everybody. The Federal Reserve should have seen the problem when it realized how many of the mortgages issued in 2006, for example, were substandard. Bank regulators should have recognized that these mortgage-backed securities were very high risk and should not have been allowed to constitute a large percentage of an institution’s reserves. The ratings agencies should have done their jobs and busted the pretenders. The politicians should have realized that when you interfere with the market — as they did with Fannie Mae, Freddie Mac, and with their homeownership initiatives — bad things can happen. Wall Street should have done enough due diligence on the enormous pool of high- risk mortgages to appreciate the risk they involved, and the buyers of the securities should have done some due diligence as well. The Treasury secretary and congressional oversight committees should have been on the watch for this kind of game-changing discontinuity, and yes, because the buck stops at the top, former president George W. Bush can’t escape some of the blame, either. Nor to his credit has he tried to. It would be a wonderful thing if Senator Chris Dodd, Congressman Barney Frank, and the others who had actually pushed for the destructive government policies would own up to their share of the responsibility for the fiasco that so deeply wounded millions of Americans.

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Some argue that blame rightfully ought to be assigned more narrowly — usually as part of their effort to deflect blame for their own failures. Wall Street greed is a common and easy target. That greed is surely part of the story. So are massive Wall Street miscalculations. Investment banks were overleveraged. Some of them had sought to identify and evaluate the risk that they had on their balance sheets, but their risk models famously were based on the 99 percent range of possibilities. But as Nassim Taleb, author of “The Black Swan,” has explained, the bankers didn’t adequately consider the 1 percent probability that national housing prices would collapse. There were voices of warning, but for the most part, they went unheeded. That’s why so many firms — and tens of thousands of investment bankers — have disappeared.

The human cost of all these errors is staggering. Millions of men and women have lost their jobs. Millions have lost their health insurance. Millions have seen lifelong savings and investments drop precipitously or even vanish. As homes have plummeted in value, millions of Americans owe more on their mortgage than their home is currently worth. The trillions of dollars in wealth that have been lost is only a partial measure of the hardship. Seniors worry that insufficient retirement funds could mean they may be forced to enter a nursing home, where Medicaid will pay the bills. Parents worry that they will be unable to afford to send their child to college. Without health insurance, families fear that a sickness or disease could impair not only finances, but also health and life. Parents who had sacrificed and invested themselves in new homes, new neighborhoods, and new schools for the sake of their children have followed the sheriff out their front door.

The issue now is how to end the hardships, how to help the economy recover. First off, it is necessary to say again that the economy will in fact recover. Downturns are always followed by recoveries and there is nothing so uniquely terrible or discontinuous in this recession as to suggest that there will never be a rebound. As I write this, encouraging signs have begun to appear. But the depth and length of the downturn, the rate of the recovery, and the long-term effects of both will be very much influenced by the actions which government takes and has taken.

President Bush signed a $152 billion stimulus bill early in 2008, but as the magnitude of the economic slide became more pronounced, a second stimulus was called for. The $12 trillion reduction in individual net worth meant that annual consumption would fall by over $500 billion. This would not be made up by rising exports because the dollar had strengthened, due to the flight to safety. Nor would investment fill the gap; lenders with capital and equity investors had become scarce. The second stimulus could have been passed in 2008. Then, too, President Bush would have had a hand in shaping it. But congressional Democrats were too wary of allowing Bush to participate in fashioning such a package, because he certainly understood much more than they the crucial role played by tax cuts in reversing the post 9/1l recession.

The “all-Democrat” stimulus that was passed in early 2009 will accelerate the timing of the start of the recovery, but not as much as it could have had it included genuine tax- and job-generating incentives. President Obama and his economic team said their stimulus would hold unemployment below 8 percent. But unemployment soared well above that level. Not only has the 2009 package already been far less than successful, it will impose a heavy burden on the economy in the intermediate and long term.

Borrowing money to stimulate the economy is quite clearly a two-edged sword. The money you borrow can get things going again, but the borrowing will eventually drive up interest rates and divert future resources to service the debt and repay the principal. That’s why every stimulus should be crafted with care and exactitude; every dollar should immediately create jobs, encourage business expansion, or provide for essential needs such as equipment for our troops at war. Instead, Congress crafted and the president acceded to a stimulus that funded unnecessary pet projects, long-term programs, and delayed employment initiatives.

In 2009, I spoke with the director of stimulus funds for a mid-Atlantic state. He candidly acknowledged to me that less than 10 percent of the federal funds his state received would actually create jobs. This has been true across the country. What a disheartening diversion of resources that could have instead powered a meaningful set of investments, protected our troops in combat, and created new jobs.

Given the shortcoming of the current stimulus, voices may emerge to craft another one. That would be the wrong course. The right course would be to fix the current stimulus by removing programs and by substituting tax incentives that create employment, such as a robust investment tax credit, a one-year write-off for 2010 capital expenditures, and a lower payroll tax. The answer is not to repeat the stimulus but to repair the stimulus. We need to stimulate the economy, not the government.

Of course the financial system itself must not be allowed to collapse, but individual institutions that do not show the capacity to right themselves should be allowed to fail. Nonfinancial businesses should also be allowed to fail; if they have future prospects, bankruptcy will allow them to reemerge as stronger, viable employers. General Motors shares should be put in the hands of the public, not the government. Politicians will only get in the way of GM’s recovery.

To speed a sustainable recovery, we must also demonstrate to the world that we have become financially responsible. The president has done just the opposite with plans that would double the national debt in five years. Massive trillion-dollar deficits could take us beyond the tipping point and lead to a worldwide crisis of confidence in America. Accordingly, our currency could experience very high rates of inflation, wiping out savings, further devastating the pool of capital needed to grow jobs, and threatening our economic vitality. We must rein in our trillion- dollar deficits, solve our looming entitlement liability problem, and show an unwavering commitment to stop spending what we do not have. New expensive programs and entitlements must be off the table. If we do not bring government finances under control, our recovery will be long and slow, and we will risk another downturn precipitated by a severely weakened dollar.

Ultimately, the recovery depends on the very same things that strengthen our long- term economy: investing in productivity, stimulating investment and innovation, exercising fiscal discipline, and securing our energy needs. There are no quick fixes, only enduring values.

It’s the Teachers

The best thing that can happen to a child once he or she arrives at school is to have a great teacher. Every one of us remembers the teachers who had the biggest impact on us — like Mr. Wonnberger, who taught my tenth-grade English class. He could barely see and, as a result, was the target of a lot of teenage humor, but despite the fact that he was nearly blind, he understood how to get the most out of all of us —and he did. He tore our papers apart paragraph byparagraph and line by line with critiques that sharpened our skills without crushing our confidence. He insisted that my classmates and I push our thinking and our writing beyond the superficial. I don’t remember what grades he gave me, but I do remember what he taught me.

There are several lessons we can learn from other nations about creating great teachers. First, make the application process to our teaching programs highly selective at the outset. Don’t admit from the bottom third academically. The “winnowing” process cannot wait until graduates have made it to the front of a classroom.

Second, select only those teacher candidates who have demonstrated high levels of intellect, literacy, and numeracy.

Third, open alternative pathways into teaching, particularly for individuals who have excelled in other fields. The experience of the best- performing education systems is that nontraditional teachers tend to be of high caliber.

And fourth, raise the base salaries of teachers who are beginning their careers. We spend much more than other countries on education, but in the United States, starting teacher salaries lag far behind the comparable starting salaries of other nations. When recent graduates are often faced with six-figure student loans, starting salary is a very significant issue in their choice of career. Further, as salaries increase over time, they should not be capped by adherence to a lock step seniority-based salary grid. Teachers should be treated like the professionals they are — and low starting salaries and fixed salary progression dissuade some of our best students from choosing this essential and valuable profession.

Obstacles to Better Schools

In addition to improving the quality of new teachers, we need to do a much better job building the skills of teachers throughout their careers. Too often, the undergraduate training our teachers receive does not significantly enhance their effectiveness in the classroom. In other professions like medicine, law, investment banking, consulting, and accounting, the most effective training occurs in the workplace. Similarly, teachers need mentors and coaches in the classroom, particularly in their early years. They need to see how their students’ progress stacks up against their fellow teachers’ classes. And young teachers especially need to be motivated to improve by viewing and adopting the best practices of others, to receive the kind of motivation that isn’t helped by a compensation system that pays the same amount to every teacher, regardless of ability. Better teachers deserve better pay, and they should have access to a teaching- career track that provides higher status and greater rewards, such as in programs that create “mentor” or “master” teachers who supervise and support other teachers.

Teachers’ unions often oppose compensation differences among teachers, whether for different levels of accomplishment, or for qualifying to teach subjects in which there are teacher shortages, such as math and science. They often also oppose using student achievement data to evaluate individual teachers. If these measures continue to be blocked, our public schools will remain uncompetitive.

Accountability is one of those things we expect from others but would prefer not to submit to ourselves. Most of us would rather be rewarded regardless of whether we excel, yet we know that if that were the case for everyone, our society would falter. Teachers’ unions do their very best to secure these insulations from performance for their members, and the results are lack of accountability, rising pay as a simple function of years on the job, and near- absolute job security. These have a deadening impact on student achievement. I don’t blame teachers’ unions for asking for such gold-plated benefits; the unions’ job is to work for their members. I blame administrators, school boards, and parents for saying yes, even when schools are manifestly failing their students.

It is not the unions’ job to fight for our children. That is our job, and it’s the task of the people we elect to represent us. Our elected representatives’ role is to sit across the table from the unions and bargain in good faith in the interest of children and parents. But the teachers’ unions long ago discovered that they could wield influence—and, in some cases, overwhelming influence—over the selection of our representatives on school boards and in state legislatures. In states like Massachusetts and in many others, it’s almost impossible to be elected a city mayor if you are opposed by the local teachers’ union, and the same is true for candidates for state representative in many legislative districts. As a result, candidates for office woo the teachers’ unions. If they secure their endorsement and are elected, the official sitting across the table from the union at bargaining time is the very person the union campaigned for and helped get into office. All too often, no one at that bargaining table is there solely to represent the interests of children and parents. Of course, there are always the requisite public nods to education reform, accountability, performance pay, and all the potential education reforms that are currently in vogue. But meaningful change is seldom accomplished. Instead, the priority almost always remains more education funding and creating smaller classes— the two measures with the least positive impact on the quality of education, but the most impact on teacher pay and union dues. When citizens vote to reduce education revenues or the state cuts back on funds, the education officials typically make the cuts where the voters will feel them most— in sports, music, arts, libraries, and computers. You simply don’t see administrators being fired or salaries being cut across the board.

The teachers’ unions have secured their greatest influence within the Democratic Party, of course, and while both parties have their respective positive attributes, the teachers’ union power in the Democratic Party isn’t one of them. My Democrat friends, in turn, point to influence groups in my party that they find objectionable, but I believe there’s a key difference. In the case of the teachers’ unions, the deleterious impact of undue influence is felt by millions of our children. The unions’ influence directly affects policies that lie at the foundation of our nation’s economy, the core of our ability to preserve freedom, and the heart of our children’s future prosperity. The reform and improvement of our failing schools is a priority that is simply too important to be shaped by such a powerful and self- interested special interest.

Beginning in the 1960s, states began to allow collective bargaining for public employees, and at the time, people plainly didn’t see the future implications for education. So-called campaign-finance reform only strengthened the relative power of the teachers’ unions by allowing them to collect dues from their millions of members and devote them to political causes and candidates. Today, the two major teachers’ unions in the United States have over 6,000 employees and annual revenues in excess of $1.5 billion, more than both political parties combined. The political power they wield to block education reforms is considerable. Even the proposed education reforms proposed by the California “Governator” were defeated by the massive money-power of the teachers’ unions. “It is a fact that [teachers’ unions] are more powerful—by far—than any other groups involved in the politics of education,” write Terry Moe and John Chubb in Liberating Learning. “To recognize as much is not to launch ideological attacks against unions. It is simply to recognize the political world as it is.” Whether you agree with the teachers’ unions’ perspectives on specific reforms or not, it’s difficult to claim that it’s healthy for education policy to be controlled by such a self- interested player.

Are there any realistic hopes for change? Well, a Democratic president or Democratic governors could, at long last, put children ahead of the unions and champion essential reforms. Or the public could vote out of office those politicians who blindly adhere to the union playbook. In fact, I believe it’s entirely possible that one key demographic within the Democratic Party, the African- American community, will see the negative effects the party’s bonds to the teachers’ unions have on their children. They will demand action that brings genuine reform to the schools that are failing their community. When I vetoed the bill that would have put a moratorium on new charter schools in Massachusetts, the Black Caucus of state senators and representatives was one of the groups that came to my defense and to the defense of the charter- school movement.

Change also may come when data about teacher and school performance becomes increasingly available to parents and communities, leaving the unions unable to staunch swelling public demand for accountability and reform. Former president George W. Bush was right to champion the No Child Left Behind legislation, which requires states to test student progress and to evaluate school performance— it was the only way to ensure that critical information reached the public. Only the federal government had the clout to force testing through the barricade mounted by the national teachers’ unions.

Those who object that national testing is too expensive are falling for one of the unions’ most specious arguments. While costs vary by state, testing generally costs less than $50 per student per year, a tiny fraction of the massive amount of funding that federal and state governments send to local schools. The unions also claim that the result of No Child Left Behind is that teachers are now simply “teaching to the test.” Yet when I went online and personally took the exam that Massachusetts now administers to prospective high- school graduates, I discovered that “teaching to the test” can only mean teaching the fundamentals of math, algebra, geometry, calculus, reading comprehension, and English composition. If giving student these skills is “teaching to the test,” then I’m all for it—our kids can’t succeed in life without these basic literacy and numeracy skills.

In an ideal world, all parents would be able to send their children to the schools of their choice, something those with high incomes can do today by selecting the city or town in which they live or by enrolling their children in private schools. Yet for average Americans, the choice is limited, or nonexistent. Some parents with modest incomes still have access to excellent parochial schools. I know, for example, that Boston’s public- school system is highly successful in part because a very large Catholic school system sits alongside it. Over 40 percent of Boston’s children attend Catholic schools, where they receive an excellent education, and the public schools feel community pressure to perform to the same standard. While vouchers that would help middle-income and moderate-income families send their children to private school are, for the most part, politically infeasible, charter schools have become a viable and very promising alternative for school choice in a number of states like Massachusetts.

Reliable studies like the one recently conducted by the Rand Corporation indicate that, on average, charter- school students do not outperform their regular public- school counterparts in math and English scores, even when adjusted for income and background disparities. But even if the results of that study are replicated in other places by other researchers, it’s possible that those literacy and numeracy scores parallel the general results from public schools because charter schools often are designed to emphasize disciplines like music, art, science, or history, and to excel in those areas of study to the satisfaction of both students and parents. Charter schools also succeed when they demonstrate new practices and stimulate innovation in the neighboring regular schools and in other public- school districts. And underperforming charter schools can have their charters revoked. If a charter school fails, it can and should be closed, something that’s hard to do with regular public schools. And, crucially, parents can choose or reject a charter school for their children, a choice that is an expression of parental right on a matter of paramount importance to them. It’s the American way to provide an American education.

Editor's Note - Read more of our exclusive excerpts from Mitt Romney's 'No Apology: The Case for American Greatness':

* Romney Part One: A Bold Blueprint for America
* Romney Part Two: Blueprint for a Strong Defense

Mitt Romney is a former governor of Massachusetts. Best known for his 2008 race for the Republican nomination for president, he has a remarkable career in private business, with his investment company, Bain Capital, helping to grow companies like Staples, Domino’s Pizza, FTD Florists and The Sports Authority, among others. In 1998 he left Bain to serve as CEO of the 2002 Winter Olympics in Salt Lake City. A frequent speaker and national television commentator, Mr. Romney has recently formed the Free And Strong America Political Action Committee. His latest book is “No Apology: The Case for American Greatness” from St. Martin’s Press.

Special: Get Mitt Romney's New Book, "No Apology" - Incredible FREE Offer - Click Here Now.


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