Are we headed for more political business as usual, where Republicans give up too much and get too little back in the debt-ceiling fight? Friday’s papers are loaded with stories on the GOP giving up Paul Ryan’s Medicare-reform package. It’s being called “political reality.”
But let me ask this: Will they also give up any attempt to slow Medicare spending in the next couple of years, at least a down-payment on the budget deficit?
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And I don’t see much talk anymore about tax reform as part of the new package. But the economy still needs an incentive jolt, which could be supplied at least by dropping the business tax rate.
Conservative Canadian Prime Minister Stephen Harper is moving to a 15 percent corporate tax rate. We’re still at 35 percent. Canada’s open for business. Are we?
Friday’s jobs report was better than expected, with a 244,000 increase in nonfarm payrolls, even though the small-business household survey fell 190,000, edging up the unemployment rate from 8.8 to 9.0 percent.
The Obama recovery has produced about two million new jobs. But compare that to the Reagan recovery that produced five million new jobs in its first two years. The current economic cycle is growing at less than 3 percent. Reagan’s first two years saw more than 7 percent growth annually.
If today’s Republican party vacates the pro-growth position of flat-tax reform and clear spending reductions, it will lose the high political ground. The Obama administration wants deficit targets in the debt-ceiling bill. But that allows for tax increases. Will the GOP man up for a clear spending cap at 20 percent of GDP, with across-the-board budget-cutting penalties? Will they get any spending reductions at all? Will the deficit and debt outlooks in the next couple of years be lower?
For all the talk about the bond market going nuts over the failure to increase the debt limit, 10-year Treasury rates have been falling, not rising. At this writing they’re 3.14 percent, down from 4 percent last year. So if the bond market isn’t panicking, why should Republicans?
At Thursday night’s GOP debate in South Carolina, only Herman Cain had a real pro-growth message with his national sales-tax/fair-tax approach. But discussion of economic growth and unemployment was minimal. Gov. Tim Pawlenty, who has been meeting with supply-side leaders, failed to articulate a single supply-side tax-cut idea. And there was no talk of spending caps or spending cuts.
What’s up with the national GOP? What’s up with the congressional GOP?
Where’s the beef on economic growth and jobs?
– Larry Kudlow, NRO’s Economics Editor, is host of CNBC’sThe Kudlow Report and author of the daily web blog, Kudlow’s Money Politic$.
As long as we don't go back to the Dubya plan, we should be okay. The animal spirits of an economy recovering from a deep recession seem to be conteracting the effects of the irresponsible tax cuts and deregulation that got us there.
The Republicans wonder why they are out of power. They are out of power because they don't stand for anything.
Reducing federal spending to 20 percent is not good enough. Spending was under 20 percent during Clinton's term for goodness sake. Federal spending was 15 percent in 1950. And federal spending was less than 5 percent before the Great Depression.
It's not just that federal spending is stifling economic growth. It's that federal spending is often very destructive. Look at the plight of the black community since LBJ's Great Society/War on Poverty programs started. Out-of-wedlock babies are more than three times higher than they were in 1963. There are numerous other examples.
Imagine how rapid our growth would be if we reduced federal spending to 5 percent of GDP and lowered taxes accordingly. Our growth would surpass that of China's for the next 100 years.
You're right no --- economic growth is the key to America's future. Enhancing growth is the pathway to balancing the budget, improving living standards and maintaining our position in the world.
If I could wave my magic wand, I would:
* Reduce government's drag on the economy by creating a flatter, broader tax system, bringing federal spending under control and reducing the regulator burden.
* Reform our immigration system to attract the brightest and best and the world. Make it easy for those with education, drive and talent to enter the U.S.
* Better education is critical. Some states are succeeding in boosting achievement (most prominently Indiana and Florida). Such initiatives need to spread nationwide.
* A stable, strong dollar is important and should be a Federal Reserve priority.
* Create a new frontier, the Moon. It is three days away and its surface contains titanium, water, iron and platinum. Focus on platinum but use it to shift to hydrogen fuel cells for vehicles on Earth.
Mak: "The animal spirits of an economy recovering from a deep recession seem to be conteracting the effects of the irresponsible tax cuts and deregulation that got us there."
What an absurd statement. Without the 2001 tax cuts our economy would have tanked on 9/12/01. It was over-regulation of the financial industry, especially mortgage lending, that led to the crisis in 2008.
A substantial reduction in current government spending, in tax rates, in regulation would have us swimming in prosperity very quickly.
Larry Kudlow's question, "Where is the GOP beef," is the primary concern. It boggles the imagination, given the disaster that is Obama and the horrible state of our economy, that the GOP candidates to date are so weak. Not weak in the polls, weak in terms of courage, strength of character and timid in making the case for ousting not only Obama, but reversing decades long Progressive policies. Playing at the margins, gaming the system to win the nomination does not reflect the political courage that will be necessary to counter the Obama machine which will be aided and abetted by the MSM right up to election day. Better to declare openly now, make the case and fight for it. If Conservatives and the GOP lose this moment, shame on them and more risk for America. I realize that I paint with a broad brush as individuals such as Cain and Paul are not reticent. It's the alleged "primary or top tier" candidates that disappoint.
@mark: Yawn. Back to blame Bush. Such a tired, old argument. Yawn.
But a convenient argument if one wants to ignore the destruction Obama has wrought upon the American economy.
By the way, every period of growth experienced in the modern era has been preceded by "Dubya" style policies.
@mark: Yawn. Back to blame Bush. Such a tired, old argument. Yawn.
But a convenient argument if one wants to ignore the destruction Obama has wrought upon the American economy.
By the way, every period of growth experienced in the modern era has been preceded by "Dubya" style policies.
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