On Economy, Mitt Romney is No Tim Tebow

On Economy, Mitt Romney is No Tim Tebow

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We are faced with a crisis in capital.  Meaning: we have less of it.  Yet, it is surprising that former Governor Mitt Romney has not delivered a bolder plan for getting businesses, especially small businesses, moving again.

With Mr. Romney bragging about his background in raising capital for distressed businesses, one would expect some robust policy proposal. The only time Mr. Romney mentions capital in any significant way is when he discusses training programs for human capital on his website.

The primary role of a government in a capitalist, free market society is to facilitate the delivery of capital into the hands of those willing and able to produce. Government, if it is to promote the validity of a capitalist economy, has to continuously address capitalism’s number one problem: the lack of capital.

Without land, money, and knowledge, citizens in a market-driven economy face increased barriers to building wealth and sustaining themselves or their families. Your stock of capital, properly used and invested, generates income and provides a buffer against downturns in the economy.

Navigating the torrential downpour of the 2007-2009 recession might have been easier for most of us if we had a sufficient stock of capital.

The minority community has felt how dwindling equity negatively impacts the ability to survive an economic downturn. Members of the community who wanted to start a business to supplement or replace income saw the piggy bank called home equity evaporate between 2005 and 2009. According to the Pew Research Council, Hispanic households saw the mean value of their home equity fall from $99,983 in 2005 to $49,145 in 2009. Black Americans also took a big hit, with their median value of home equity falling from $76,910 in 2005 to $59,000 in 2009.

According to Pew Research, given that whites hold a greater share of their wealth in stocks than Blacks or Hispanics, Whites did not see as much erosion in their wealth. Between 2005 and 2009, White Americans saw their net worth fall from $134,992 to $113,149. Black Americans saw their net worth fall from $12,124 to $5,677. Asian Americans took a big hit with net worth falling from $168,103 to $78,066. Hispanic Americans saw net worth fall from $18,359 to $6,325.

When it came to median values, directly held stocks and mutual funds, Asian Americans actually saw the median value of directly held stocks and mutual funds increase between 2005 and 2009. Median value of their holdings went from $25,270 in 2005 to $30,000 in 2009.

Black and Hispanic Americans did not fare as well. Black Americans saw the median value of directly held stock and mutual funds plummet from $27,468 to $8,000, according to the Pew Research Council. Hispanic Americans saw their median value fall from $21,974 to $15,000.

Nor have we fared well with ownership of business equity. Six percent of African Americans own equity in a business. That percentage has not changed between 2005 and 2009. The median value of this business ownership equity has changed, however, with business equity falling to $10,000 in 2009 from $23,403 in 2005.

Eight percent of Hispanic Americans owned business equity in 2005, with the median value at $32,961. While the percentage of Hispanic Americans owning business equity held at eight percent in 2009, median value of business equity fell to approximately $10,000 that year.

Asian Americans saw only a one percentage point change in business equity, with 12% holding business equity in 2005 versus 11% owning business equity in 2009. The median value of business equity fell from $54,935 in 2005 to $27,000 in 2009.

Access to credit has become harder since the financial crisis came to a head in the fall of 2008. Banks have more restrictive standards for lending and reduced equity in business and homes only compounds the problem.

The downside to Mr. Romney’s tepid approach toward putting the capital into capitalism is that he is passing up a golden opportunity to make some inroads with the minority community. Either he considers such an approach as sullying his aloof nature or – worse – gives his Republican critics more ammunition for the argument that he is really a moderate in disguise.

Mr. Romney could reconcile his image with the scorn of the right wing by promoting a brokering role for government, where government helps identify businesses in need of capital and provides the forums for getting these businesses together with investors willing and able to provide them with capital. Any agency responsible for regulating an industry sector i.e., the Federal Communications Commission would have as one of its primary responsibilities promoting ways for capitalists and entrepreneurs to meet and engage.

The idea isn’t new. Some agencies already do this on a small scale. But, given the state of capital formation and allocation in the economy and the overall restructure of an economy that is becoming more knowledge-based, government should be encouraging businesses to adapt so that they make themselves more attractive to financiers while working as more viable players in a new economy.

While the Obama Administration recognizes that the economy is becoming a knowledge-based one, it has purposefully mired itself in a strategy that calls for attacking the finance industry and preventing the natural flow of wealth transfer by slowing down the foreclosure process with its mortgage modification programs. The Obama economic strategy gives Romney and company an opportunity to sneak in with a bolder capital distribution plan.

Question is: Will Mr. Romney stick with the” reliable spouse” image by being slow and steady? Or will he show the energy and progressiveness the Office of the President actually calls for?

2 COMMENTS

  1. "The primary role of a government in a capitalist, free market society is to facilitate the delivery of capital into the hands of those willing and able to produce."

    If you believe that you are not a capitalist.

    It is the primary role of government in a capitalist society to provide the economic, social, and legal stability necessary for capitalists (snd everyone else) to flourish. It is in fact government manipulating the delivery of capital that has put us in the current mess.

    By the way, tight money and diminished equity are not race-related problems. All of us are in the same sinking boat together and will stay that way until the government stops trying to help us and gives us back our economic freedom. I believe Mr. Romney understands that.

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