JOURNAL EDITORIAL REPORT

Mitt Romney's tax confusion

Campaign muddles mandate message

 

This is a rush transcript from "Journal Editorial Report," July 7, 2012. This copy may not be in its final form and may be updated.

DAVID ASMAN, GUEST HOST: This week on the "Journal Editorial Report," Mitt Romney's tax confusion. Did he bungle his response on the ObamaCare mandate? Is it a sign of bigger campaign problems?

Also, President Obama swinging through some battleground states, doubling down on accusations that Mitt Romney outsourced jobs. The charges may be questionable, but are they working?

Also, weak job growth coupled with the worst manufacturing numbers in three years has some economists worried. Are we headed into another recession?

Welcome to the "Journal Editorial Report." I'm David Asman, in this week for Paul Gigot.

Is it or isn't it? We know the Obama administration has been playing word games about the health care mandate right from the beginning, but now, the Romney campaign can't seem to make up its mind whether it's really a tax. And early this week, Romney advisor, Eric Fehrnstrom, said his boss had the same view as the White House, that it's a penalty, not a tax. But the candidate himself later walked that back, telling CBS News, quote, "The majority of the court said it's a tax and, therefore, it is a tax. They have spoken, there's no way around that," end quote.

But has the opportunity to hang this vast middle class tax increase on President Obama been lost in the confusion? And does it reveal larger problems within the Romney campaign?

Let's ask Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and columnist, Mary Anastasia O'Grady.

Dan, how has the campaign dealt with this?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Obviously, not well, David. You've just went through the sequence. The Supreme Court of the United States said it's a tax and they upheld the Obama health care law. The Obama White House says, it's not a tax, it's a penalty. Even though the law has been upheld, every major Republican says they have imposed a tax on the middle class, along comes the Romney campaign, oh, we agree, it's a penalty. Now, why are they saying this? They're saying this because Mitt Romney himself enacted the mandate in the Massachusetts health care law and they're afraid to have that called a tax. And that Massachusetts health care law is turning out to be the biggest gosh darn albatross is any presidential candidate has ever had to --

(CROSSTALK)

ASMAN: Romney doesn't want to admit that.

HENNINGER: I think he's got to admit that.

(CROSSTALK)

HENNINGER: It's never too late.

(LAUGHTER)

He has got it get that thing off his back and repudiate it.

ASMAN: James, after spending so much time defending what he did in Massachusetts, how can he now come out and say that the mandate was a mistake with ObamaCare and a mistake in Massachusetts?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes, I think what he's got to understand is what the American people care more about than his consistency of health care policies over the years is their life and their money and their health. And this big government plan, which has now been affirmed, is going to take their money and guide their health care decisions. So, I think -- you know, it's not too late for Mr. Romney to say it's now clear how big of a disaster it this was and Mr. Obama's lawyer convinced the Supreme Court it was a tax and he also increased the authority for lots of other taxes.

ASMAN: Well, the Wall Street Journal editorial page became news itself became news this week with an editorial you guys ran on Thursday entitled, "Romney's Tax Confusion." You talked about the confusion whether it's a penalty or a tax. and you mentioned one person in particular, Eric Fehrnstrom, who works for the Romney campaign and the guy who first agreed with President Obama and forced Romney to walk back and say, no, President Obama is wrong, it is a tax. The suggestion is a shake-up is needed within the Romney administration. Is that true?

MARY ANASTASIA O'GRADY, COLUMNIST: I would say it's such a huge missed opportunity. You wonder who is behind this. How could see that ball coming over the plate and not hit it? This is a huge tax increase. President Obama is positioning the health care reform as something that is soft and cuddly and will make you feel better and make everybody -- put everybody in a better position. And this shows very clearly that it's going to be expensive and he could have built on that with the fact that it's 2,700 pages. No one knows how it's going to affect doctors. The costs of it are very high. And this was a great opportunity that I think they just completely missed.

ASMAN: But, Dan, there was a big shake-up famously in the Reagan campaign back in 1980, sort of at this point is their campaign. Is a shake-up in the Romney campaign needed to straighten out the course?

HENNINGER: David, look, we're not inside the campaigns. We don't know who is saying what. But I have another example that I think is almost as bad as the mandate tax issue. That is the 4th of July Jet Ski photograph.

(LAUGHTER)

Seriously. This is like John Kerry water skiing.

ASMAN: With Governor Romney and his wife.

HENNINGER: Yes, on a Jet Ski, which sort of supports of the Obama idea this is a rich guy who has expensive toys.

Now, I think any campaign manager worth his salt would have said to the candidate, you cannot get in the water on the Jet Ski with the photographers over there. But if the candidate says, I'm entitled to relax and I can do what I want to do, then the problems are at the top with Mitt Romney's political instincts. And then we'll have a problem where, two months from now, you will have a Michael Dukakis photograph --

(LAUGHTER)

-- And he'll blow his campaign out of the water.

ASMAN: Well, is a change at the top necessary? You mentioned in the editorial, you mentioned Eric Fehrnstrom --

(CROSSTALK)

FREEMAN: -- the changes at the top.

(LAUGHTER)

(CROSSTALK)

ASMAN: The top of the T. Obviously, Romney is the head of the campaign, but his campaign manager.

FREEMAN: Mr. Fehrnstrom -- I supposed you worry about someone if you read the "Boston Globe" every day long enough, eventually, they might start to believe it. I think, really, the problem here is probably with Mr. Romney, that he needs to set a message, endorse a message and be willing to communicate it and deliver it with enthusiasm. And to this points, he's basically been saying, Obama is doing a terrible job, look at my resume. You need something more.

ASMAN: Let's bring it back to the beginning. Finally, Governor Christie, of New Jersey, says, it doesn't matter what name you use to call ObamaCare mandate, whether it's a tax or a penalty, it still boils down to the same thing, big government telling you how to spend your money for something very personal in your life. That's what you should focus on, rather than words. Was he right?

O'GRADY: Yes, I find that one of the problems with the Romney camp, it's not just this particular issue, but the fact that he's continually letting President Obama put him on the defensive. He has to choose a message, and the message should be, basically, that Obama is offering you a big entitlement state. Do you want to sign up for that? Give evidence of what life under the big entitlement state is like. And explain, I have a different path and explain what that is. And instead, He's constantly sucked into these debates about, you know, words or, whether he's rich or, you know, whether he should be allowed to be a rich president. I mean, he's defending himself. He should be on the offensive.

ASMAN: And he's in control of his campaign.

HENNINGER: We're given to believe that Romney is a strong manager, he was at Bain, that he's not a shrinking violent, and in the campaign, he is in control of the campaign. And I'm simply suggesting, David, I don't think that Mitt Romney -- he may be an excellent president because he's a strong manager, but he's not a major-league politician. And he needs someone around him who really does understand the nuances.

ASMAN: Last word on the subject.

When we come back, President Obama doubles down on charges that Mitt Romney outsourced jobs while at Bain Capital, even though the charge appears to be bogus. We'll take a closer look at the claims and Romney's response coming up next.

(COMMERCIAL BREAK)

ASMAN: Well, Mitt Romney and his campaign may have bungled the health care tax message, but they are at last responding to charges by the Obama campaign that Romney out-sourced American jobs overseas during his 15 year career at Bain Capital. Although the outsourcing claims have been questioned by independent fact checkers, the president doubled down on that line of attack in a new ad released in nine battleground states. The Romney campaign, for its part, is up in the swing state of Ohio with this response.

(BEGIN VIDEO CLIP)

AD NARRATOR: Barack Obama's attacks against Mitt Romney are just not true. The Washington Post says, "On just about every level, this ad is misleading, unfair and untrue." But that's Barack Obama. He also attacked Hillary Clinton with vicious lies.

HILLARY CLINTON, SECRETARY OF STATE: He continues to spend millions of dollars perpetuating falsehoods.

AD NARRATOR: Mitt Romney has a plan to get America working. Barack Obama, worst job record since the Depression.

CLINTON: So, shame on you, Barack Obama.

(END VIDEO CLIP)

ASMAN: James, you have been looking at the charges a long time. Do the charges have any merit at all?

FREEMAN: Zero. Mr. Obama is very lucky that no one is applying to his presidency the jobs metric he's trying to apply to Mitt Romney. Basically, what he does, he searches around for a few jobs, or a few cases where people were laid off or jobs moved overseas, and he reports that number. Some of the media says, well, that's not accurate. It wasn't even when Mr. Romney was at the company. But the point is, let me put it --

ASMAN: Let me just put a fine point on it.

(CROSSTALK)

ASMAN: And they would say, for example, four jobs went overseas, not reporting that 100 jobs were created here.

FREEMAN: Right. And you look at the Bain record, and it's phenomenal. This is a great American success story. More than 80 percent of the hundreds of companies they've backed with grown revenues. The companies in total have grown their revenue by about $100 billion. I mean, you've heard the successes in terms of Staples and Bright Horizons Child Care Centers. There are tons of companies you haven't heard of, (INAUDIBLE), in manufacturing and in technology. You're talking about hundreds of thousands of jobs created and it's a phenomenal record. I think Mr. Romney ought to be more aggressive about sharing it.

ASMAN: Mary, if the charges are so bogus, why aren't they having enough political traction for the Obama political team to double down on their bet?

O'GRADY: First, they're fixating on Ohio, a place that's sensitive to outsourcing. But the other problem is, the Obama -- the Romney campaign does not know how to defend global economics. One of the charges against him is, as governor, he vetoed a bill that would have prohibited the state from outsourcing call centers. The idea of doing that is that you're not going to pay top dollar in Massachusetts when you could get this call center answering the calls at a cheaper price and, therefore, Massachusetts taxpayers are not going to be paying as much money. That was a smart thing. And when he vetoed it, the legislature did not get enough job -- votes to override the veto, which showed everybody knew it was right. He should defend that.

ASMAN: By the way, before we started, you said something I thought hit the nail on the head. The real charge is that he's rich. Isn't that what Obama is really trying to do here?

O'GRADY: Well --

(CROSSTALK)

ASMAN: This is a rich guy you could never identify with.

O'GRADY: I said he was guilty of being rich, which is even worse. And, yes, I mean, that's -- again, Obama has been able to put him on the defensive continually, and this is what he needs to. I think this ad is good. He's starting to push back, but he needs to do a lot.

ASMAN: Dan?

HENNINGER: I think the name of the game, David, from the Obama standpoint, is to simply engulf the Romney campaign in stuff like this, so that they cannot mount an offensive against Obama. I mean, Obama is vulnerable on his record and so he's filling the air with shrapnel, basically --

(LAUGHTER)

-- so that the Romney campaign can't get at him. And he's, so far, being pretty successful, because the Romney people are spending a tremendous amount of time honoring the charges. Is that what the American people want to hear or, as said to Mitt Romney, at one point, Mr. Romney has a plan, but they haven't even begun to talk about the details of the plan because they're pinned down under this barrage.

ASMAN: James, the charges are so bogus, that even leading Democrats -- we've got a list of Democrats who said that Bain Capital is it not guilty of what the Obama administration says it is. Cory Booker, Ed Rendell, Duval Patrick, Bill Clinton. Come on. Why doesn't the Romney campaign doesn't just use these guys for their message?

FREEMAN: They have. Although, you know what happens, when the Democrats dare, under the truth, that Bain Capital is a wealth and job creator, the Chicago campaign headquarters lands on these people and they tend to stop talking about it. But the reason all the Democrats have acknowledged it, it's the plain fact. This is one of the great stories that Dan has written about from the 1980s. These companies made America more competitive. And the Bain model was basically taking business consultants, who knew how to turn companies around, and try and revive some of the firms.

ASMAN: It's called creating capital. You can't have capitalism without capital, right?

O'GRADY: You also can't have jobs without creating wealth. You know, I think again, Romney should send out the message that, basically, what President Obama wants to do is punish the people who have the money to create jobs. Does that make sense? Of course, not.

ASMAN: Last word from Mary.

Still ahead, a mediocre jobs report, a manufacturing drop off and a service sector slump. The numbers are in and June was a cruel, cruel month. Will July be any better or are we on the brink of another recession?

(COMMERCIAL BREAK)

ASMAN: The June numbers are in and they spelled more bad news. Friday's jobs report, unemployment steady at 8.2 percent and only 80,000 new jobs added. Earlier this week, economists reported that U.S. manufacturing shrank in June for the first time in nearly three years in the service sector. We're at the slowest pace in nearly two and a half years.

So, Mary, you had the two pillars of the economy, manufacturing and service, both of which are floundering. Are we headed for another recession?

O'GRADY: Well, whether we go into a recession or we just stay at, you know, 1.5 percent growth, I don't think is going to matter a lot to those millions of people who are out of work. I mean, I think what you're seeing here is an enormous amount of pessimism among people who have capital to employ, but aren't really very confident about, you know, what would happen if they take that risk. And, you know, this government has created a lot of uncertainty. If you talk to CEOs, the overwhelming number of them will tell you, there's just too much uncertainty between Obama-care, energy development, taxes, the list goes on and on. And President Obama has not done anything to resolve any of those uncertainties.

ASMAN: Dan, this is the weakest -- you can call it a recovery from recession that at least I've had in my lifetime, and yet, it seems to have peaked.

HENNINGER: In its own terms, the recovery is extremely disturbing for the reasons that Mary said. It should have grown at five or six percent. The fact that the United States and the American economy, $15 trillion economy is only growing at two percent at best, really says pretty awful things for our prospects.

Now, we are in a state of high anxiety over this economy. And as a political matter, I think it's up -- the question is which of those two candidates is going to be able to explain to the American people, at every level of income, poor people, middle class people, businessmen who are sitting on the money, why is this happening to us? And Barack Obama really doesn't have a narrative for that for --

(CROSSTALK)

ASMAN: Let me just jump in. Because his narrative has been, this was a financial recession, unlike other recessions, and they are much worse, and that's why we're stuck at --

(CROSSTALK)

HENNINGER: This is about the here and now. And the question is, who can explain what's going on right now?

FREEMAN: Well, the economy was growing faster earlier in his term. The recession ended years ago, so, at a certain point, people are -- you would think, are going to start demanding results. And think if we have a non-ideological president right now, the natural reaction, another terrible reaction to another jobs report, would be to talk to Congress and say, OK, we've got a problem here, all of these tax increases scheduled for the end of the year, how do we avoid this further blow to the economy? We're not seeing that.

ASMAN: The one response we usually see, we get another bad jobs report is maybe we should have another stimulus? Do you think we'll hear that again?

O'GRADY: Well --

(CROSSTALK)

ASMAN: Do you think we'll hear that call again?

O'GRADY: The president still believes that one of the fundamental problems here is that jobs in the government sector are shrinking, you know, there are fewer government employees, and he thinks that's the problem. I thought it was very interesting this week. Austan Goolsbee wrote a piece in our paper where he said --

(CROSSTALK)

ASMAN: Austan Goolsbee was a former economic adviser to the president.

O'GRADY: Yes, and still a great proponent of the president's policies. And he said that the market did not collapse on the news of ObamaCare being upheld. And that's proves that the business community is not concerned about ObamaCare. And I think that's silly. People are paralyzed. There's a capital strike. And the fact that John Roberts ruled that it's a tax instead of a penalty did not make anybody, who had money to put to work, feel any better.

ASMAN: Dan, there's something that doesn't show up on the figures and that's the feeling of the American public. The American public feels that things are not going well, and tend it take it out on the politicians in charge. Is that going to happen in this election?

HENNINGER: I think it could if Mr. Romney makes the case that the people should be held to account.

To your point, whether it should be another stimulus, there is an old expression we used to have about trying to stimulate the economy this way after a period of low growth, which is pushing on a string, and everybody understands what that means. The economy is in a state of strength. It needs something more than moan thrown at it. It needs to be incentivized. And that's your point, David. That people need some reason to invest capital and go back to work, and it's just not there right now.

ASMAN: There are trillions and trillions of dollars. That's why any kind of stimulus -- there are two kinds of stimulus, fiscal stimulus, from the politicians lowering tax rates, et cetera or spending more government money, and then there's the monetary increase where the Federal Reserve prints more money. Is there any chance that that monetary stimulus will be enacted? It may not work but will it be enacted?

FREEMAN: Yes. I think, as you say, the fiscal stimulus, the odds that Mr. Obama and Congress work something out between now and the election are very close to zero, so, yes, I think this is a time where you would expect Ben Bernanke to say, well, they're not fixing the problem on the political side, maybe I've got to do more.

(CROSSTALK)

ASMAN: Even though there are already trillions of dollars in our banking system not being used.

FREEMAN: But, who would be shocked to see them say, we're going to try more treasuries and mortgage-backed securities?

O'GRADY: You've left the door open for them.

FREEMAN: Absolutely.

ASMAN: Last word.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

ASMAN: It's time now for my favorite part of the show, our "Hits and Misses" of the week.

Mary, first to you.

O'GRADY: This is a hit for Marine Captain Katie Patronio, who wrote a politically incorrect essay about women in combat for the Marine Corps Gazette. It was titled, "Get Over It. We're not all created equal." The captain wrote, and I quote, "I can say from firsthand experience in Iraq and Afghanistan, and not just emotions, that we haven't even begun to analyze and comprehend the gender-specific medical issues and overall physical toll continuous combat operations will have on females."

ASMAN: Wow.

O'GRADY: I'd call that a very brave Marine.

ASMAN: Indeed. Of course, there's no other kind of Marine.

James, what do you have?

FREEMAN: A hit to my president, Barack Obama, for his campaign trip. The bus tour through the Midwest this week and he paid for it with actual funds raised by his campaign.

ASMAN: Why is that notable?

FREEMAN: Recently, he tends to like to go to swing states and a rally and call it official business and the taxpayers pay for them. This is great progress. This is actually paid for by his campaign.

(CROSSTALK)

ASMAN: So finally because of the prodding of the editorial page of the Wall Street Journal, he's paying up for these.

FREEMAN: Well done, Mr. President.

ASMAN: Dan, what do you have?

HENNINGER: Well, I'm giving a miss to our friends at Associated Press who ran a story this week whose headline over a story about this summer's extreme weather was, "This is what global warming looks like." They actually went out and quoted scientists who said this summer's wildfires, drought, heat and last week's freak wind storm in the east was exactly what they're warning about from global warming. So does this mean that if we just install solar panels and all buy electric cars, this stuff is going away? Personally, I prefer the Bible solution -- repent.

(LAUGHTER)

ASMAN: Of course, they didn't mention in this story, by the way, we have the calmest season for hurricanes in about a hundred years.

HENNINGER: Always a silver lining. Always a silver lining.

ASMAN: All right, Dan. Thank you very much.

And that's it for this week's edition of the "Journal Editorial Report. " Thanks to my panel and to all of you for watching. I'm David Asman. You can catch me on "After the Bell," weekdays at 4:00 p.m. on Fox Business, and right here Saturday morning at 11:00 on "Forbes on Fox." Paul is back next week. We'll see you then.

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