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Coolidge Redux
The most conservative administration since Coolidge.


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Larry Kudlow

On the eve of the Republican National Convention in Philadelphia, Texas Gov. George W. Bush has a commanding lead in the major polls, and appears set to lead the Republican Party to a three-house Washington sweep this November. What’s more, with Dick Cheney as his veep, and the likelihood that fellow Texas oil man and campaign chairman Donald Evans will assume the all-important White House position of chief of staff, we could be looking at the most conservative GOP administration since Calvin Coolidge’s victory in 1924.

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For those of you who just might have forgotten, Coolidge’s vice president was former Harding budget director and Chicago banker Charles Dawes. Coolidge kept on former-President Harding’s Treasury man, Andrew Mellon. Working with a Republican Congress during the mid 1920s, these men continued the “return to normalcy” policies of Warren Harding by cutting tax rates, reducing federal spending, and lowering the post-WWI Federal debt.

Sound familiar?

Now, look at the recent polls. As predicted by Ed Goeas and Scott Rasmussen (see The Weak-End of Polling), weekday polls of likely voters are much more accurate than weekend polls. So the latest USA Today/Gallup poll canvassing likely voters July 25-26 (after the Cheney veep story broke) shows Bush with a 50-39 lead over Gore in a four-man race. This was a complete turnaround from Gallup’s weekend July 14-16 survey, which showed only a two-point lead for Bush. But it restores Bush’s double-digit lead tallied by Gallup in mid-June.

Supporting the Gallup results, the Rasmussen tracking pollconducted Monday, Tuesday, and Wednesday — shows Bush with a 45-34 lead, with Ralph Nader at 3.9% and Pat Buchanan at 1.4% (only slightly ahead of Libertarian Harry Browne’s 1% total). Both Gallup and Rasmussen show the Congressional race a dead heat, which probably means that the Republicans actually have a 4-6 percentage-point lead.

It’s also worth mentioning that the recent Zogby “American Values” survey reveals that likely independent voters favor George Bush’s positions on abortion, taxes, and gun control over Al Gore’s. This could prove to be very significant come November, and implies that Bush’s decision to bypass McCain as his veep was a wise choice.

According to Zogby, 48.9% of independents would support a candidate who would ban partial-birth abortions, compared to 41.2% who would support a candidate who would veto partial-birth bans. On guns, likely independent voters, by an overwhelming 69% to 25%, said they would support a candidate who wants better enforcement of current gun-control laws over a candidate who wants more gun-control laws. And on taxes, a majority of independent voters (63.7%) say they pay too much in federal taxes. Nearly half (47.9%) of respondents said a 10-20% tax rate “would be fair.” Interestingly, the Gallup poll gives Bush a huge 49-28 lead among likely voting independents.

And there’s more on taxes. According to Rasmussen, 69% of American adults want President Clinton to sign the bill to end the so-called marriage tax penalty. But get this: When asked which would be preferable, a bill to end the marriage-tax penalty or a tax cut for all Americans, 62% opted for a tax cut for all, while only 29% preferred to end the marriage tax, according to Rasmussen’s “Portrait of America” tally.

Now here’s another thought. The second-quarter real gross domestic product economic report just released this morning shows that inflation-adjusted real GDP over the past year has increased by a technology-driven 6%. (This is itself a remarkable number, when combined with only 2.1% inflation, which is actually only 1.7% when the temporary oil bubble is removed.)

The American workforce, however, saw its inflation-adjusted disposable personal income (“disposable” means after-tax) rise by only half, or 3%, compared to 6% national income growth. In effect, folks are taking home only half of the incremental income they are producing. This, of course, reflects the growing tax burden paid by middle-income Americans who have been penalized by our progressive tax code as their hard work has pushed them from the 15% bracket to the 28% bracket — and, with growing frequency, right up through the 31% bracket to the 36% bracket. Personal tax payments over the past year have increased by 12.2%, or roughly 10% in real terms. Meanwhile, Federal spending adjusted for inflation has increased by 5.1 % — its fastest pace since 1987.

So, in the waning moments of the Clinton-Gore economy, Uncle Sam is overspending and overtaxing. Since George W. Bush has indicated time and again that tax surpluses should be returned to the workforce in order to prevent Washington from spending all these resources, it’s no wonder that Bush holds a commanding lead among independents — who simply disagree with Al Gore that tax cuts are “risky schemes.”

Yes, the Internet economy is prospering, but more and more Americans want to become card-carrying members of the new investor class. To do that requires more saving of after-tax income. That, however, requires more after-tax income. And that, in turn, will require across-the-board tax-cuts of exactly the sort Gov. Bush has been proposing, so folks have ownership of more of their after-tax take-home pay.

All this suggests that one of the key positions in a prospective Bush administration will be the post of Treasury Secretary. Thus far, there have been no rumors. Bush economic adviser Larry Lindsey is probably slated to be chairman of a Bush council of economic advisers. But the Treasury job, along with the chief-of-staff slot, will be absolutely crucial in developing tax policy, and then selling it on Capitol Hill.

During Ronald Reagan’s tax-cutting first term, Donald Regan was a relentless proponent of Reagan’s plan to lower marginal tax rates. Vice President Papa Bush opposed the supply-side package during the primaries. Chief of Staff James Baker, who was Bush’s campaign manager, became a good soldier and helped push the tax cuts on the Hill. But it was Don Regan who really carried the ball.

Seventy-five years ago Pittsburgh banker Andrew Mellon was a larger-than-life figure in Washington. At Coolidge’s behest, Mellon was unflagging in his support for tax cuts. George W. Bush will need the same sort of support in 2001. The first six months of a new Bush administration will provide the crucial window of opportunity. Steve Forbes would make an excellent choice. But if not Mr. Forbes, then it must be someone else who has the interest of American taxpayers in the very marrow of his bones.



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