More On Tax Planningfrom The Advisor's Professional Library
- Precious Metal Taxation Precious metals can be used to better diversify a portfolio but can be volatile. The tax implications of investing in these types of assets vary depending upon the situation.
- Annuities: Estate Tax The value of certain types of annuities may be included in an estate’s value. Understanding the intricacies of these inclusions is a critically important aspect of estate planning.
If Gov. Romney wins the election, his Cabinet will take a very different direction on economic policy than President Obama’s—particularly since Romney has opted not to commit to include any Democrats in his administration. Here are some possibilities for Romney appointees to those key Cabinet positions that guide economic policy, and a couple of new ones Obama might make if he is re-elected.
The outlook Paul Ryan (left) would bring to a Romney Cabinet includes such diverse author influences as Ayn Rand (although of late he has distanced himself from her religious views, her fiscal principles are still very much in evidence) and the Austrian economist Friedrich Hayek, author of The Road to Serfdom.
Among the mentors who have shaped Ryan’s view of both politics and economics are the libertarian Rich Hart, an economics professor who discussed not just economics but politics with the future VP candidate. Hart, who according to a Los Angeles Times report jokes that he is a member of a group of faculty at Miami University of Ohio that’s “to the right of Attila the Hun,” opposes the minimum wage and believes that public schools fail inner-city kids.
Others who have influenced Ryan’s beliefs to one degree or another include the late Rep. Jack Kemp, R-N.Y., although he, says a Newsmax report, unlike Ryan, did not espouse government cuts or tough love for the poor. There’s also former education secretary and drug czar Bill Bennett, who served under Reagan and the first Bush in those posts, respectively; Sen. Marco Rubio, R-Fla., a champion of supply-side economics; and Stanford University economist John Taylor, who has served in three Republican administrations.
Who would Romney choose to head the Treasury Department instead of Tim Geithner? Speculation runs rife that it could be anyone from former World Bank President Robert Zoellick (left), who has already been offering Romney guidance on foreign policy, to Sen. Rob Portman, R-Ohio, who served as Office of Management and Budget (OMB) director under George W. Bush. But Portman’s accession to a Treasury slot rather than retaining his seat in the Senate could jeopardize Republican legislative goals should outcomes continue to depend on a few senators’ votes either way—so Portman could opt, or be opted, out of eligibility.
Another likely possibility is Glenn Hubbard, dean of Columbia University’s business school, who served as chairman of the Council of Economic Advisers early under George W. Bush and also helped to orchestrate the 2001 and 2003 Bush tax cuts. A recent profile of Hubbard in The New York Times, titled “Romney’s Go-To Economist,” says that Hubbard not only assisted in the drafting of Romney’s economic and tax policies, he also gave his stamp of approval to those he did not originate.
Hubbard’s elevation to head Treasury could mean he would be out of the running to chair the Federal Reserve—a post that comes up in 2014—so, depending on his preferences, he, too, might bow out. If so, Treasury could end up being run by Mike Leavitt, former Utah governor and Health and Human Services secretary under President George W. Bush. Leavitt, a fellow Mormon, is currently heading Romney’s transition team, but has been mentioned as a possible candidate for Treasury secretary—although chief of staff could be more likely.
Obama Cabinet Changes: But What About…
With Geithner (far left) departing even if President Obama wins a second term, some names are being bandied about for his replacement in a Democratic administration. They include Erskine Bowles, of Simpson-Bowles fame; Bowles formerly served as White House chief of staff to President Bill Clinton. (There is a chance that Romney could opt for Bowles as well, since his hand on the deficit reduction plan was so heavy—it would give a nod to bipartisanship.)
Another mention as a replacement in a second Democratic term, according to The New York Times, is Laurence Fink, CEO of BlackRock (Jamie Dimon, CEO of JPMorgan Chase, was reportedly also on the list at one point, but now apparently has been crossed off).
But the favorite, according to The Times, is Jacob Lew, Obama’s chief of staff. Lew, a former lawyer and career technocrat, put in a brief stint as CEO of Citigroup’s Alternative Investments unit, but other than that is not known for having a business background.
Currently headed by Hilda L. Solis, Labor could be in for a major shakeup as well. One of the splashier names being bruited about as her possible successor in a Romney administration is Scott Walker (left), governor of Wisconsin, who made headlines by tangling with public worker unions in an effort to control the state's budget. Former Sen. Jim Talent of Missouri, co-chairman at the lobbying and public strategy firm Mercury Public Affairs, has also been mentioned in connection with the job.
Another possibility, and one less politically fraught, is that of William Kilberg, lead counsel for Boeing, who also chairs the Labor Policy Committee for the Romney campaign.
Kilberg has taken on the National Labor Relations Board on Boeing’s behalf after the NLRB filed suit claiming that Boeing opened a new plant in Charleston, S.C., to retaliate against union workers in the Puget Sound area for striking. He has also served as legal counsel for the Department of Labor.
Romney Cabinet: Federal Reserve
Glenn Hubbard (left), already mentioned as a possibility for Treasury secretary, could end up running the Fed instead when Ben Bernanke's term as chairman ends in 2014. In his previous role in the Bush administration, Hubbard advocated financial deregulation. He has also been criticized for being too chummy with the industries about which he studies and writes. Both could possibly count as strikes against him for this position.
Another possibility is Martin Feldstein, professor of economics at Harvard University, who used to chair Reagan’s Council of Economic Advisors and who has not hesitated to voice his low opinion of Bernanke’s use of QE. A Feldstein appointment would place the Romney administration firmly in the camp of anti-inflationism, while also bolstering support for Romney’s tax plan.
John Taylor, whose mentoring influence on Ryan has already been noted, is another contender for the slot, and supposedly a top one. With previous service on the White House Council of Economic Advisers and as under secretary of Treasury for international affairs, Taylor is experienced in public policy. He was also the originator of the Taylor Rule, used to set interest rates. And he too is critical of Bernanke’s tactics to combat the financial crisis.
One more name that has come up as a candidate, if an outside one, for Fed chief is Gregory Mankiw, professor of economics at Harvard. A couple of Mankiw’s more controversial beliefs are, according to The Blaze, that economic inequality is natural and outsourcing is good.
Of course, with Ben Bernanke’s recent announcement to friends, if not to the public, that he won’t serve a third term even if Obama is re-elected, change will apparently come to the Fed regardless of the election’s outcome. Lawrence Summers, says The New York Times, is at the top of the list. Treasury secretary under Clinton and director of the National Economic Council for Obama, Summers is thought to offer follow-through on Bernanke’s policies.
If not Summers, then who? Janet Yellen, vice chairwoman of the Federal Reserve, would be the first woman to run the Fed if chosen, and she too could offer continuity. Economist Alan Krueger also gets a mention; he served for a short time as an assistant secretary of the Treasury for economic policy under Obama.
And since it will be a year till Bernanke steps down, one more possibility is being offered: Tim Geithner. After a year out of Treasury, the theory goes, Geithner may be ready and willing to take on the Fed. He’s already put in time, after all, as president of the Federal Reserve Bank of New York during the financial crisis.
Presently chaired by Alan B. Krueger (left), Obama’s council is bound to transform dramatically if it becomes a Romney council.
Romney’s current economic advisors include the aforementioned Glenn Hubbard, Jim Talent and Gregory Mankiw, another former chairman of the Council of Economic Advisers under Bush; Vin Weber, who served in Congress from 1983–1993 and now works as a lobbyist; and American Enterprise Institute Senior Fellow Kevin Hassett, who has served as economic advisor to George W. Bush in 2004 and to John McCain during his presidential bids in 2000 and 2008.
Hubbard, Mankiw, Hassett and Talent have all advocated for Social Security privatization, although Talent has since backed off.
Hubbard and Mankiw, as previously mentioned, have already served in the capacity of chairman and are being considered elsewhere. But Stanford University economist John Taylor, likely to serve on the Council, could also be tapped to chair it, as could Hassett.
A Romney council could contain any or all of these, and perhaps include as well any candidates for other financial posts who do not make the final cut.
Who might replace Secretary Shaun L.S. Donovan as head of HUD? A couple of possibilities include Sen. Richard Shelby (near left) of Alabama, the ranking member of the Senate Committee on Banking, Housing and Urban Affairs, and Rick Baker, former mayor of St. Petersburg, Fla., who currently serves Romney as urban policy advisor. Baker, according to Forbes, is a big proponent of downtowns, which could mean making urban revitalization a priority.
Another name being floated is that of former Rep. Rick Lazio, R-N.Y., who advises Romney on housing. While still in Congress, Lazio chaired what was at the time the House Banking Committee’s Subcommittee on Housing and Community Opportunity, and according to some Republican sources, his position as a former legislator could be a plus. Of course, sources also say that a mayor on the way to the top or a housing commissioner with a solid reputation could also be tapped for the position.
There simply hasn’t been a whole lot of chatter, at least in some circles, over who could take on the post, given the possibility that Romney could just opt not to appoint anyone. That would follow through on a previous statement that he’d shut down the department altogether as a budget-cutting measure. Some feel it unlikely that Romney will go that far, considering that his father used to hold the post.
Romney Cabinet: Office of Management & Budget
Jeffrey Zients, acting director, could be replaced by former Congressional Budget Office chief Douglas Holtz-Eakin (left). The latter served from August 1989 to July 1990 as senior staff economist on the first President Bush’s Council of Economic Advisers. He was chair of the economics department at Syracuse University from 1997 to 2001, and in 2009 Holtz-Eakin served on the Financial Crisis Inquiry Commission, appointed by Senate Minority Leader Mitch McConnell.
Should the helm not fall to Holtz-Eakin, former Rep. Jim Nussle of Iowa, who was director of OMB under George W. Bush and also chaired the House Budget Committee, could get the nod—or instead, perhaps, former Sen. Judd Gregg of New Hampshire could be Romney’s pick. Gregg previously served as chairman of the Senate Budget Committee, and also works with the deficit-reduction advocacy group Fix the Debt.
One last possibility—Portman might choose this (or be chosen for it) over Treasury. The fact that he’s already sung this song might make him more, or less, anxious for an encore.
Romney Cabinet: U.S. Trade Representative
Ambassador Ronald Kirk could see himself replaced by Dave Heineman (left), governor of Nebraska and, according to Omaha.com, the first governor to endorse Romney. Heineman’s name has also been mentioned as a possibility for secretary of commerce.
Even though he’s not being discussed for this slot, in favor of the headier role at Treasury, Rob Portman formerly held this post—and he was on the short list for vice presidential candidates before Romney chose Ryan. So Portman might have a bit of influence on Romney’s selection process.
Whoever comes to the office under a Romney administration will be tasked with getting tough on China, if Romney follows through on campaign promises—to label China a currency manipulator and to pursue unfair trade practices claims.
However, Romney’s own investments through blind trusts include a number of Chinese companies, and his criticism of China for stealing American jobs has been tarnished a bit by the revelation that when he was still in charge at Bain Capital, according to a Forbes report, he invested $14.2 million in Global-Tech, a Chinese company that depended on the outsourcing of U.S. jobs for its success.
That could make it just a bit challenging for Romney’s trade rep to follow through on his tough trade talk on China, whoever he selects.
Please check out AdvisorOne's Election Impact 2012 home page for complete advisor-related election coverage, including: