Wednesday, October 17, 2012

The Answer Romney Couldn’t Say

“Of course the numbers add up,” Mitt Romney said during the presidential debate last night. It was his way of refusing to answer a question about how he might respond to a shortfall in his financial plan for the U.S. government. He went on to say that in his experience in business, the numbers always add up.

That last assertion is not something anyone who ever ran a business would be able to say. Even freelancers, who run the smallest businesses there are, know that business never works out the way you draw it up. It is your customers who ultimately determine how much revenue comes in. The outside world also has some influence on your costs, so you can’t expect to control those perfectly either. This is why no business plan ever translates perfectly to reality.

Businesses don’t make things work by planning every detail in advance. They plan as well as they can, but then they adjust to circumstances as they go along. And when the numbers don’t add up in a business, you typically:

  • seek additional financing
  • start making cuts, such as closing facilities, selling assets, and laying off workers

Romney’s financial plan, in truth, doesn’t add up. Everyone who has looked at it agrees it comes up trillions of dollars short. And so the question Romney refused to entertain during the debate does need an answer. The answer of necessity follows along the same lines that anyone can observe in a struggling business, but on a larger scale than any business would have to consider:

  • trillions of dollars of additional financing in a combination of higher taxes and increased government debt
  • trillions of dollars in cuts, which could include things like closing military bases and selling off military aircraft, canceling purchases, and laying off workers

The old rule of thumb in business planning is that $1 million in a budget covers about 10 workers. Closing a budget gap in the trillions would mean job cuts by the millions. That’s something everyone should envision when they look at Romney’s plan.

Romney can’t talk about millions of layoffs in a campaign that has “more jobs” as a theme, which is why he couldn’t answer the question. Imagine how it might have sounded if he had said in his chuckling Reagan imitation, “Well, Candy, it’s the same as in business — that’s when we start laying people off. And if the experts are right, why, we’ll be looking at more Americans without jobs than ever before.” That would be the right answer factually. Romney probably even knows that answer. But being a politician means not saying it.