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W. Slams a Homer For Growth
The Texas governor at the top of his form.


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Larry Kudlow

In case you missed it, George W. Bush auditioned in front of the investor class yesterday with an interview conducted by CNBC’s Ron Insana. W. was at the top of his form. The tough-minded independent Insana drilled him with a series of questions, and Bush responded with gusto on every count.

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But here’s what got me clicking my heels. The Texas governor talked growth. Tax cuts and growth. Growth and Social Security. For the first time, Bush associated himself with a 4% economic growth target.

Insana asked him, What if economic assumptions overstate GDP by 1% in each of the next 10 years, and there is no budget surplus? Here’s Bush’s response:

As I understand, [the] CBO is projecting a growth rate of 2.7%. Alan Greenspan thinks it will be 4%. If that is the case, there will be $2 trillion extra dollars. What’s needed is somebody to set parameters, what we need is a leader who says that the taxpayers need some of the money back….The surplus is going to be there when I am there, but one reason why the surplus might not be there is because the economy slows down, and that is all the more reason to give people their money back. That is why I’m for tax relief. I think it is an important rule for economic growth.”

Bush has this exactly right. Greenspan and the Fed believe the U.S. economy is capable of 4% growth. Budget projections show that future surpluses, under a 4% growth target, would come in close to $7 trillion, way above the current $4.6 trillion estimate made by the Congressional Budget Office. This kind of thinking is exactly the missing link in the Bush economic program. Tax-cut incentives will promote capital formation, productivity, jobs, and growth. There will be plenty of surplus resources to fund lower marginal tax rates and personal retirement accounts.

As George Bush moves onto the growth track, he more and more articulates the sort of Reaganesque optimism that voters want to see. He’s been circling the growth wagon for many weeks, in the debates and elsewhere. But this is the first time he’s really hit the nail on the head.

Here’s another Reaganesque play by W. On the campaign trail yesterday in Michigan, according to wire-service reports, Bush claimed the mantle of President Franklin D. Roosevelt by telling audiences, in regard to his Social Security reform plan, that “This is a new deal for a new generation, the rising generation of Americans. This is the natural next step — moving tens of millions of Americans toward true independence.”

Ronal Reagan frequently reminded blue-collar Democrats in 1980 that he voted for FDR four times. That calmed people over social safety-net concerns, including Social Security and health care. Bush is following a similar script.

In the CNBC interview, Bush also emphasized again and again that he is the pro-business candidate while Al Gore is the anti-business candidate. Bush made it very clear that he favors “innovation, not litigation” in reference to the Microsoft anti-trust suit. And the Texan emphasized a pro-growth energy policy of additional production to fuel the economy.

In an interesting sidebar, Ron Insana asked Bush who might be his next treasury secretary. Here’s Bush’s response:

I don’t know. I really don’t know, and I’m not so presumptuous as to be picking a cabinet until the people have voted. Larry Lindsey, I think you know, I’m close to; I spend a lot of time talking to Larry. The people will come from the belief that government ought to be limited, that we ought to continue to grow the economy by people having more money in their pocket. I think taxes are too high, I know it’s a big issue in this campaign, I’m not getting off it. I don’t give a darn what the polls say. People are paying too much in taxes.

Well now, very interesting. The Lindsey rumors from the Philadelphia convention are still alive. Bush’s top economic adviser, who crafted the tax-cut plan, and who as a former Federal Reserve board member argued for a strong U.S. dollar, looks to be the frontrunner for the key treasury post.

George Bush, hammering on growth in the final weeks of the campaign, is closing strong. He’s developing a winning message of growth and optimism. He’s letting Al Gore hang himself with the Old Democrat message of fear and pessimism.

Oh, and one last point. CNBC’s Insana reminded W. that his father opposed supply-side tax cuts — calling them voodoo economics. Here’s Bush’s response:

Well, it turned out Mr. Reagan was right by cutting taxes. By the way, 40 years ago, John Kennedy campaigned on cutting taxes. Maybe it requires every 20 years for this country to realize how important it is to cut taxes. Reagan did the right thing, because the economy is growing, not only because of the ingenuity of the American people, but because of the capital provided as the result of a tax cut. And yeah, absolutely, it was the right thing to have done in the ’80s and the right thing to do as we go into the 21st century.

Right on, George. Hold that thought.



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