After a convincing victory in New Hampshire, South Carolina offers Mr. Romney the opportunity to become the presumptive Republican nominee and define the issues for the fall campaign.
For his GOP opponents, South Carolina posses the last good opportunity to break Mr. Romney's momentum. Without better showings than in New Hampshire, his rivals will be challenged to raise enough money to be effective in Florida, which is an expensive state to contest. Primaries and caucuses that follow -- Nevada, Arizona and Michigan -- are likely more favorable to Mr. Romney.
South Carolina has a large concentration of Evangelicals and other conservative Christians suspicious of Romney's positions on abortion and gay marriage, and Tea Party supporters who find Romney's Massachusetts health care plan too remindful of Obamacare.
PACs backing Romney opponents will flood the airwaves with ads decrying Romney's shifting positions on social issues and health care, and attacking his claims that his private equity firm, Bail Capital, created 100,000 jobs rebuilding companies like Staples, Domino's Pizza and Sports Authority.
He would better off staying above the fray on social issues. Simply, President Obama will enjoy an advantage in the general election if Mr. Romney tries too earnestly to answer those claims, because most voters, nationally, would prefer the government not legislate morality and stay out of their bedrooms. However, unemployment is 10 percent in South Carolina -- that provides Mr. Romney with an opening to refocus the immediate contest and define the debate for the fall campaign.
Romney's claims about Bail Capital are silly -- private equity funds purchase and shapeup for resale companies that are often overstaffed, or that should simply be broken up to release value. The net impact on employment of all Bain's activities could not be largely positive, and it was a major tactical error for Mr. Romney to point to his experience at Bain as evidence that he is a jobs creator.
Instead, Mr. Romney should tackle the big issues responsible for slow growth and high unemployment that have been identified by Mr. Obama but that the President has failed to remedy.
Repeatedly, President Obama has cited China's undervalued currency and unfair trade practices as slowing U.S. growth, and the need develop more domestic energy.
As a candidate in 2008, the President promised strong action but has since only pleaded with China -- to the point of national embarrassment -- and obtained few meaningful results. Mr. Romney has proposed a tax on Chinese imports to push Beijing to change.
On oil, the President funded alternative energy projects while shutting down most offshore drilling. Solyndra was a fiasco, and solar and wind power will not significantly replace oil -- imported or domestically produced -- for another 20 years. Mr. Romney wants to accelerate domestic exploration and development, and with oil at $100 a barrel, the United States could become a net petroleum exported again within ten years.
President Obama's health care reforms are increasing the premiums and co-pays, and bankrupting the federal treasury. Mr. Romney sensibly understands it is better to distribute resources and responsibilities to the states and let them develop alternative approaches. Most states don't like his Massachusetts health care -- fine, Mr. Romney doesn't pretend to know what's best for everyone on health care, energy and just about everything else, unlike the present occupant of the Oval Office.
Wall Street abuses did much to thrust the U.S. economy into the Great Recession, but the cure has been worse than the disease. Dodd-Frank, championed by President Obama, encourages large Wall Street banks to acquire smaller regional institutions, who are flummoxed by the quagmire of new federal regulations. This concentrates control of most U.S. bank deposits among a handful of the largest financial institutions on Wall Street, and limits lending to small and medium-sized enterprises that create the most new jobs.
Fixing the banks may be the toughest challenge for Mitt Romney -- a man made wealthy by big bonus finance. However, among all candidates, he should know best how to slay the beast eating American capitalism -- Wall Street finance. He needs to tell voters what he would put in place of Dodd Frank, not just that he wants to repeal it.
In South Carolina, Mr. Romney can score a big victory and put the President on the defensive for a poor economy by explaining what's broke and how his approaches to trade with China, energy, health care, and banking will get the economy going again.
Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission. Follow him on Twitter.