This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Romney Will Raise Taxes, Private Equity Argues

NEW YORK ( TheStreet) - Candidate Mitt Romney wants you to believe he will lower taxes while cutting the national debt.

But President Romney will need to raise taxes if he is going to have any chance of lowering U.S. debt, according to his former private equity pals.

Now a strong frontrunner for the Republican presidential nomination, Romney has repeatedly said that cutting the national debt, reducing the budget deficit and curbing taxation will be a key to his economic agenda.

Mitt Romney

The problem is that while tax cuts and a less mindboggling national debt would be nice, Romney's plan wouldn't work if it were taken to the White House and some in the private equity industry that made Romney a millionaire know it.

David Rubenstein, co-founder of The Carlyle Group said that only a policy of spending cuts and tax increases will chip away at the national debt, which he says is the most pressing long-term issue facing the U.S. "Some combination of the two will work," said Rubenstein, who was speaking at a Columbia University Business school panel last week. The private equity titan outlined three other ways to tackle a debt that may grow to $25 trillion; inflation, a default or an International Monetary Fund rescue. No U.S. president has ever run on those policies and Rubenstein wouldn't advise starting now.

For more on Rubenstein, see why private equity has a social responsibility.

As someone who celebrates many points of Romney's investing and growth agenda, Rubenstein's dismissal of simultaneous tax and debt cuts signal a rift in what may be campaign trail posturing and what is achievable in office. It means that though Romney's calls for a smaller and smarter government are a tribute to Ronald Reagan's economic proposition for the 1980s, an eventual tax increase may have a more cutting likeness.

Reagan campaigned on an economic platform of lowering taxes to spur the growth to bolster government tax receipts, stemming what was a budget deficit that equated to 2.7% of overall GDP at the time. Though the plan was called "voodoo economics" by then candidate George H.W. Bush in election primaries, Reagan won voters and shortly after taking office he signed the Economic Recovery Tax Act of 1981, which cut the top marginal rate to from 70% to 50%.

The deficit quickly soared and President Reagan quickly changed course, raising taxes through the Tax Equity and Fiscal Responsibility Act and the Highway Revenue Act of 1982. A similar pivot in campaign promises and policy reversals may be in store for Romney.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $124.43 -1.54%
FB $82.22 -1.18%
GOOG $548.00 -0.73%
TSLA $188.77 -0.94%
YHOO $44.44 -1.15%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs