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Kudlow’s Money Politic$

Larry Kudlow’s daily web log of matters political and financial.

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Cantor’s Pro-Growth Call

Economic growth over the past ten years has been less than 2 percent annually. And this is a mighty soft economic recovery going on right now, following the very deep recession.

So it’s appropriate enough that Republican House Majority Leader Eric Cantor unveiled a strong pro-growth economic plan at Stanford’s Hoover Institution this week. Cantor is afraid the Republican budget-cutting message is a little too austere, so he’s attempting to balance the necessary budget cuts with a pro-growth, tax-and-regulatory reform message.

Cantor focuses especially on getting business tax rates down to at least 25 percent. He also proposes a tax holiday to repatriate the foreign earnings of U.S. companies. So many CEOs have made the same argument. And this was done successfully in 2004-05. If enacted, maybe $1 trillion in cash will flow back home for new investment and jobs.

But no sooner did Cantor make this speech, than the Treasury shot down any idea of a corporate-tax holiday. I guess this is the same Treasury that works for the Obama 2.0 pro-business president. Or not.

Cantor is completely right on this. He’s also right on his other proposals to lower trade barriers and put a freeze on regulatory burdens.

Mr. Cantor also has an interesting proposal to deal with the backlog of 700,000 patent requests in order to speed American innovation and small-business creation. He also believes the visa system should be streamlined to bring in high-skilled workers from abroad in order to create new jobs at home.

It will be interesting to see if Cantor’s growth message is taken up by other Republican leaders, most particularly Paul Ryan. Will Mr. Ryan include tax-and-regulatory reform with his tough budget-cutting proposals?

The only thing missing from Eric Cantor’s speech was a monetary hook to stabilize the dollar. The GOP needs a King Dollar policy. Otherwise, all the best tax cuts will be blunted by a sinking dollar and rising inflation.

But bravo to Eric Cantor for getting out a growth message. And let’s see if the GOP presidential wannabes pick up on the need for growth plan.

New on Kudlow’s Money Politics. . .


COMMENTS   5

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Plato
   03/23/11 19:27

Amen to that, Larry. Our immigration policy of keeping out the educated and entrepreneurial while allowing in any unskilled future welfare recipient able to break the law and enter illegally has become an economic millstone around our necks when it should be a growth engine.

Jim Manzi has written eloquently about "immigration as recruiting." Canada and Australia do it, and we need to as well -- as the Federal Reserve Bank of Dallas (External Link ) and Oracle President Safra Catz (External Link ) have both said.

We can talk all we want about the things that make an economy in today's world successful: innovation, educated workers, a transparent and well-oiled legal system strictly adherent to the rule of law and property rights, but we won't actually be able to deliver on any of this without ensuring that we create the conditions to attract the world's best, rather than a large class of individuals unfit for the global economy.

Canada, Australia and New Zealand have increased their global competitiveness through skills-and-merit-based immigration points systems. They have open, fair and objective standards that let people from *everywhere on earth* (not just relying on a country adjacent to them) in on their skills and merits.

As a result, these countries have large, diverse immigrant populations that are socially mobile, fully assimilated, not a drain on government resources, and more likely to be sitting at the table next to you in the restaurant than washing your dishes.

Today in America, our immigration framework is built around unskilled laborers who can illegally enter (and are seldom subsequently prosecuted or deported) and family unification, while we kick out the foreign engineering PhDs once they've graduated. In large part because we have a high level of immigration based on individuals who are unlikely in their lifetime ever to rise to the education or income standards of native-born Americans or legal Asian immigrants to the US, we have growing income inequality, declining test scores, stagnating or declining incomes -- and atrophying economic competitiveness. Let's face it: If we allow in millions of uneducated laborers who aren't ready for the global economy, our country at large becomes that much less competitive in the global economy.

A fair, geography- and race-agnostic, meritocratic system like Canada's is what the United States must move toward. To continue being economically competitive -- not to mention a global melting pot with a culture and economy appealing to people everywhere -- we need to start a "smart immigration" policy as Canada and Australia have done. Americans are open to immigration and letting others join our culture. But we'll never be able to ensure innovation, an ability to produce high-value exports, or any other pillars of a strong player in the global economy if we continue to have an immigration policy aimed at negatively impacting the most important factor in economic competitiveness -- human capital.

Bravo to Cantor, and let's hope that a smart guy like Ryan picks up on those remarks and that the presidential contenders run with them (though I'm not holding my breath with the presidential candidates). Let's also hope that people in the media like you start the conversation about how immigration policy should be -- all you hear about is the illegals, but what about the plight of skilled workers (like many of my colleagues) from all over the world who have to jump through untold hoops and (in the case of Indian skilled workers) wait 10 or more years? This is the most important issue facing us, and the GOP needs to back off the lame identity politics and push immigration as a tool for growth -- a message that the 80% of the population that wants to finally end illegal immigration, and the 100% that wants the economy to improve, will be pleased to hear.

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Clark Coleman
   03/24/11 21:21

Plato, you are missing the point. Cantor is not proposing a merit-based points system for immigration that would keep out the unskilled peasants. He is just proposing to increase the visa quotas for high-skilled immigrants. The peasants would continue to come as well. He is probably wholly owned by the corporate cheap-labor lobby, who want to import workers of every skill level to drive down wages.

When Cantor starts proposing to keep the unskilled peasants out, I will be happy to stand corrected.

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   03/24/11 21:42

Until after the 2012 elections we have no chance to create rational policy, we can only restrict more worse policy to a degree. There is not a department of this current administration that is going to be interested in improving anything. No effort whatsoever has even been recommended, let alone attempted. However ever attempt by the GOP has been rejected instantly.

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   03/26/11 10:46

Rep. Cantor is over thinking the situation. We sent the Repubs there to be austere. He needs to get back with that program. Cut spending 20%, install a flat tax of 15%, stand back and watch the economy take off. Done.

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   03/28/11 13:22

@WFB
You could never get Obama or Reid to go along with any Republicans pass with that magnitude. Not much will happen until after 2012. Republicans can restrict more Obamacare type damage, but can't create policy or force anything, they can only prevent.

So not much gets done until after 2012, and we hope Obama gets replaced and Reid as well. Then we can get plenty done such as Cantor suggests or you offer.

Until then, the only group that has power in this country are the Republican Governors. They can do much in their states to fix the economy at their level and limit government and improve their state level budgets and economies. I would create incentives for business to move to my state from more liberal states where budgets and taxes are higher and worse. That should be a campaign that would be fairly easy to implement as liberal states are not doing what is necessary to fix their budgets other than raising taxes. Caterpillar might leave Illinois, I would make sure they got the grand tour of my conservative state and offered them plenty to make the decision rather easy to grow my tax base, labor pool, business diversity etc. If you land Caterpillar, you land hundreds of supporting businesses and revenues improve the area and state instantly without raising taxes. You also provide massive amounts of jobs and opportunities for your state.

That is the fertile opportunity between now and 2012, not creating new business out of nothing, because legislation won't be passed in this environment that would help anyone. They are all good ideas going nowhere as you have opposing views unwilling to compromise on anything until 2013.

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