Romney's economic claims challenged

February 4, 2008 11:02:13 AM PST
It's part of Mitt Romney's core narrative: Massachusetts, in the throes of a fiscal freefall, fell back on his CEO skills and turnaround wizardry to spark - in his words - "a dramatic reversal of state fortunes and a period of sustained economic expansion." It's a rosy opinion of Massachusetts' economy that few in the state share. Instead, observers say, the state's recovery from a disastrous 2001 recession has been tepid at best, and Romney gives himself more credit than deserved on job creation and balancing the state budget.

Romney says that by the time he left office, the unemployment rate in Massachusetts was lower and the state had recovered nearly 80,000 jobs from the low point of the recession.

A fuller look reveals a state still struggling to recoup the jobs washed away in the recession, while much of the rest of the country has already sailed past pre-recession highs.

According to state unemployment numbers, the net number of jobs added during the four years Romney was in office was 24,400 - a fraction of the total of about 200,000 lost during the recession.

Although the number of new jobs steadily climbed during Romney's four years in office - from a loss of 54,700 in his first year to a gain of 34,700 in his final year - most of the rest of the country rebounded much faster.

Massachusetts is one of just six states that hasn't added back all the jobs lost during the recession.

"Our losses were steeper, and our gains have been slower and as an end result we are still nearly 100,000 jobs down," said Dana Ansel, research director for the Massachusetts Institute for a New Commonwealth, a nonpartisan think tank.

The state's unemployment numbers also showed little movement during Romney's tenure.

In December 2002, as Romney prepared to step into office, Massachusetts unemployment rate stood at 5.6 percent, slightly lower than the national unemployment rate of 6 percent.

By December 2006 - Romney's last full month in office - national unemployment had fallen to just 4.5 percent while Massachusetts unemployment numbers had inched down to 5.2 percent.

"We've had a very slow economic recovery and we've trailed most of the rest of the nation," said Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation. "It's not the turnaround he's advertised."

Another key Romney claim was that he was able - through a mix of spending cuts and fiscal discipline - to close a nearly $3 billion budget gap he inherited as he walked into office.

While fiscal watchdogs also pegged the budget gap at about $3 billion, they point out that Romney also inherited something else - revenues from a massive $1.1 billion package of tax increases passed by the Democrat-controlled state Legislature the year before he took office.

A spike in revenues in his first year in office helped cut that deficit nearly in half.

"He was lucky. He dodged a bullet," said David Tuerck, executive director of the Beacon Hill Institute at Suffolk University. "If he was in office a year earlier, he would have faced a very difficult choice."

Another of Romney's key, and most contested, economic claims is that he was able to close the $3 billion hole without raising taxes or increasing debt.

Critics have been quick to point out that while Romney opposed any broad-based taxes, he hiked business taxes by about $300 million by closing so-called tax "loopholes" - and would have raised even more until pressure from business leaders forced him to cut one of the proposed loophole closings in half.

He also pushed through a broad series of new and higher fees that brought in an additional $260 million during his first year.

Observers say Romney can claim some legitimate fiscal successes - vetoing spending increases, fighting against tax increases, and helping lure some businesses to Massachusetts, including a new facility being built by Bristol-Myers Squibb.

"The economy when Mitt Romney left was clearly not where any of us wanted it to be, but it was headed in the right direction," said state Rep. Brad Jones, the Republican leader in the Democrat-controlled Massachusetts House and a supporter of Romney. "Clearly it's accurate that the economy turned around from where it was and where it was headed."

But many in Massachusetts, including business leaders, say they see in Romney's legacy a history of missed opportunities.

When he was running for governor, Romney pledged to be the state's salesman-in-chief, luring companies to the struggling state.

That role shifted as he eyed a run for president and tried to distance himself from Massachusetts' liberal reputation.

"Unfortunately, he spent a lot of time out of state and as his preliminary campaign started he spent a lot of time badmouthing and making fun of the state," said Brian Gilmore, executive vice president of the Associated Industries of Massachusetts, which represents 7,000 businesses and employers.

"I certainly didn't think that helped," he said.

Romney spokesman Eric Fehrnstrom said Romney critics are relying on "convenient memories" to downplay Romney's success rescuing Massachusetts' economy at a time of crisis.

"The Massachusetts economy was a basket case when Mitt Romney took office," Fehrnstrom said. "Governor Romney stopped the job losses, and turned the economy around so that by the time he left office the state was adding thousands of jobs every month.

"Under Mitt Romney, unemployment went down, jobs went up and hundreds of companies expanded or moved to Massachusetts," he added.

Tuerck of the Beacon Hill Institute agreed the state's economy was in dire shape when Romney took office and he credits him for resisting broad tax increases, but he said Romney can't claim credit for restoring the state to full fiscal health.

"It's an exaggeration to say it is a sustained economic recovery," Tuerck said. "No one should think that he was responsible for turning the state from a basket case to a poster child for economic recovery."