Pros and Cons on Pawlenty’s Speech

by Ramesh Ponnuru

1) I like that Pawlenty would radically reduce the overtaxation of savings and investment. The capital-gains tax, the estate tax, the interest-income tax, and the dividend tax would all be gone. We’d basically have a consumption tax.

2) Corporate tax reform also seems like a good idea, for reasons that will be familiar to NR readers.

3) The 5-percent growth target strikes me as pointless. Setting the target doesn’t make good economic policies any better, or bad ones any good. The target also seems unrealistic. But if it’s just a way of saying that we shouldn’t settle for recent growth rates, I suppose it’s harmless.

4) I don’t see how he can implement his tax-rate proposals without a big increase in the deficit–or spending cuts far beyond any he has proposed.

5) He’s right to want to narrow the Fed’s mandate. But “monetary policy that is focused like a laser on curbing inflation” and promoting “price stability” would not have prevented the formation of any of the bubbles of the last 15 years, at least if he has in mind annual inflation in the 0-2 percent range as his target. It might not even have prevented QE2, as he seems to think. (As I’m the resident pro-QE2 guy here, that’s a good thing in my mind.) And it would be more sensible to narrow the Fed’s mandate to keeping the growth of nominal income stable.