Update: Mitt Romney Comes Roaring Back After Losing Frontrunner Status in South Carolina
publication date: Jan 24, 2012
Update February 1, 2012: What a difference 10 days makes.
After losing by a wide margin in South Carolina, Mitt Romney came roaring back in Florida's Republican primary and trounced Newt Gingrich. I don't expect that Romney has put behind him all of the troubles he's had talking about his own money and discussed in the article below but he's clearly heading in the right direction now after two strong debate performances.
Despite a commanding lead in the polls just days before the South Carolina primary, Newt Gingrich came from behind to convincingly defeat Mitt Romney by double-digits in the South Carolina Republican primary. This happened in large part due to Romney's unsatisfying answers about his personal finances and tax situation and the news media's extremely negative coverage of Romney.
The Media Pounds Romney
According to an analysis of the media's coverage done by the Center for Media and Public Affairs, a non-profit, non-partisan research organization affiliated with George Mason University:
"...Mitt Romney is getting by far the most negative press of the GOP field, according to a new study of television news coverage...the study also found that the campaign horse race is getting over six times as much coverage as the candidates' positions on policy issues. According to CMPA director and George Mason University professor Robert Lichter, "The media love a horse race and hate a frontrunner."
...Mitt Romney was the only major candidate to receive a majority of negative evaluations by sources and reporters, on both the broadcast network nightly news and FOX "Special Report."
...On the broadcast networks, evaluative comments of Romney were 78% negative vs. only 22% positive. By contrast, on-air judgments of Ron Paul were 73% positive vs. 27% negative, evaluations of Jon Huntsman were 71% positive vs. 29% negative, Rick Santorum's evaluations were 56% positive vs. 44% negative, and comments about Newt Gingrich were 52% positive vs. 48% negative.
...CBS had the most positive portrayals -- 57% positive vs. 43% negative, partly because of its highly favorable (89% positive) evaluations of Ron Paul. FOX had the most balanced overall coverage with 52% positive vs. 48% negative comments. NBC was the most negative overall with 27% positive vs. 73% negative coverage, followed closely by ABC with 32% positive vs. 68% negative coverage. Both NBC and ABC featured 85% negative comments on Romney.
Romney's Trouble Talking about His Money
Just about every time Romney spoke about his own finances in the past week, he managed to say something that got him negative publicity. This past week wasn't the first time during the nomination process Romney had trouble talking about his own money. In a month ago televised debate, Romney challenged Rick Perry to a $10,000 bet (see video below) about Romney's positions on an individual health insurance mandate. That amount made some folks gasp and feel that Romney's wealth placed him out of touch with regular folks. In a televised debate to the public, offering to make such a large wager wasn't a wise thing to do but perhaps Romney was thinking that he wanted to convey his conviction in what he was saying and wished to back it up with a significant amount.
In speaking informally with a reporter on the campaign trail, Romney "admitted" that his effective tax rate is closer to the 15 percent rate levied on long-term capital gains and stock dividend income. This, of course, doesn't sound good for reasons articulated by Obama supporter Warren Buffett who has decried the fact that his own tax rate is less than that of his secretary. Romney, who is 64 years old, is essentially of retirement age and doesn't have a full-time job or pension income so it shouldn't surprise anyone that the bulk of his income comes from investments which are taxed a favorable rate.
Romney also missed the opportunity to point out the large absolute dollar amount that he pays in income taxes which matters more to the U.S. Treasury coffers than the rate. In fact, in my examination of his tax returns, I see that the Romney's paid more than $6 million in taxes over the past two years (more than most Americans earn in their lifetimes) and also donated more than $7 million to charity.
Romney also got beaten up for giving weak and unclear answers when pressed about releasing his personal income tax returns. He has since released his 2010 and estimated 2011 taxes. He could take a cue from Newt Gingrich who turned the tables on and berated the CNN reporter for asking him about his ex-wife's claim that Newt wanted an "open marriage." Romney could have rightfully said that the news media has no respect for the privacy of the candidates' personal finances.
In referring to his other income, Romney stuck his foot squarely in his mouth by saying his speaking fees, which totaled more than $374,000 over the past year, were "not very much." And, technically, he is correct because those fees amount to just under 0.2 percent of his net worth! This would be like someone worth $500,000 describing about $1,000 of extra income as not very much which is not unreasonable. But, this is one of those thoughts that popped into his head that he should have kept to himself! You do, however, have to admire the man for his candor!
Romney's also is getting questioned about having some of his investment money stashed in the Cayman Islands, which is known as a tax haven. It doesn't appear that Romney has done anything illegal in having some of his Bain Capital funds in the Cayman's.
Romney or Gingrich, Does it Matter Who Wins?
Of course it matters. The Republican nomination process is selecting the candidate who will oppose President Obama in this November's election. I will be reviewing the economic plans of the candidates but this much I can tell you from what I have seen and heard thus far. Gingrich's plans are a much more significant departure from what we are currently doing. Some may see that as a good thing but some will be attracted to the status quo and improving incrementally upon that and will be afraid of talk of a radical change. Romney's plans call for some significant changes in economic policies, but not nearly as dramatic as Gingrich's plans. Consider, for example, that under Gingrich's tax plan, the Romney's would be paying practically no income tax as Gingrich's plan eliminates tax on investment income! Romney's plan, by contrast eliminates tax on investment income for those with less than $200,000 of income.
Gingrich has surged back into the lead in the polling for the Republican primaries. But, in direct match ups against President Obama, he still lags far behind whereas Romney is the only Republican candidate who polls close to even or better than Obama. There are still 47 states to go and we likely have a lengthy race, and many more debates, in front of us.
The financial markets are always looking ahead and dislike uncertainty which of course is part of any election season. I think Romney would be viewed as a favorable change for the economy and thus the markets are likely to react positively if it looks like he would win. A Gingrich nomination would appear to raise more uncertainty in part since he hasn't matched up well in polls with Obama.