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A W For Bush


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Larry Kudlow

The bottom line from last night’s debate is that George W. Bush will probably win the New Hampshire primary. He probably hit bottom about a month ago, but now his stock is rising again, while John McCain seemed to peak a month ago and his stock continues to plummet. Key to the turnabout is taxes.

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Bush handled himself well on the tax question, arguing that he would cut taxes if there is a recession to stimulate growth, and also cut them during a period of growth to provide insurance against a downturn. That’s sound economic logic. But his strongest argument was his warning to McCain: “You’re making a huge leap of faith that Congress won’t spend the money [available from surpluses]. I want to make sure they don’t. So let’s pass it back to the taxpayers.” Bush has captured what will be the essence of the big economic debate in the fall election: namely what to do with the growing federal surpluses.

Another noteworthy moment for Bush was his statement that he would ask for the help of God in the Oval Office. It was an excellent response to Tim Russert’s pounding on his controversial Christ answer in the last debate. Bush continues to show that he is better when he goes with his instincts than when he sticks to scripted responses.

Meanwhile, McCain argued that the surplus should be used to save Social Security and pay down the debt. That position has the footprints of austerity-minded former senators Warren Rudman and Bob Dole all over it. McCain went even further, saying he opposes using all of the surplus for tax cuts and opposes giving tax cuts to the rich. That is a remarkable statement from a Republican presidential contender and leaves McCain in full agreement with President Clinton and candidates Gore and Bradley. There is no doubt that it will hurt him.

We are still waiting for McCain’s new tax plan, which is supposed to have expanded savings accounts, but it won’t be credible so long as he continues to argue that we shouldn’t give the rich tax cuts, and we ought to focus on retiring the debt. (In fairness to McCain, the bright spot here is his support for making permanent the Internet tax moratorium.) It is important to understand that debt retirement helps the government to save, but it doesn’t help individual men and women. If tax rates are left unchanged, individuals can’t increase their personal savings and investment. So, McCain is playing into the hands of the government status quo.

McCain’s position on these issues undermines his stated intent to stomp out special interests, because he won’t do anything to reduce the power and influence of government. And when it comes to special interests, the issue of McCain carrying water for large contributors is going to become a growing problem for him. On the FCC question and other issues last night, McCain was very defensive. He doesn’t take criticism well. I saw a lot of glib non-joke joking, a lot of play-acting, a lot of discomfort under attack.

As for Steve Forbes, he gave an excellent answer in defense of the flat tax against Gary Bauer’s attack, arguing that farmers and small businesses need quickly to recoup their investments (in other words, the flat tax would allow them immediate and full-cash expensing write-offs). But otherwise Forbes seemed more intent on attacking Bush than on explaining and marketing his own flat-tax program. His campaign has been plagued by a failure to communicate in detail and in symbolism. If Forbes erred on the side of over-explaining the flat tax in 1996, he is guilty this year of under-explaining it and failing to rally people to the cause.

So, in short, give the night to Bush, and maybe the primary too.



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