You would think that with one of the weakest economic recoveries on record, President Obama would be desperately searching for ways to promote economic growth. It is, after all, an election year. Most pundit and pollsters agree that it’s the economy stupid.
But instead, Obama used his State of the Union speech to rail on about fairness, inequality, and redistribution. The Obama strategy is simple: Tax the rich because they don’t pay enough.
Newt Gingrich and I go a long way back, to the beginning of the Reagan supply-side revival of free-market capitalism. I thought we shared that philosophy. But his attacks on Bain Capital — using the class-envy language of the left against capitalist success — are a great disappointment to me. Newt resumed that Bain attack when he said in Florida that Mitt “lives in a world of Swiss bank accounts and Cayman Island accounts and automatic $20 million income for no work.”
Romney earned his income. And his successful investments all represent market opportunities. However, once again I fear that Newt is all too willing to sacrifice his principles for political expediency in the heat of the campaign. Below, in two parts, is my interview with Gingrich which aired on Thursday night’s Kudlow Report.
President Obama’s proposal to increase taxes on the rich is “designed to come at me,” GOP presidential contender Mitt Romney told me this morning.
In his State of the Union speech Tuesday night, Obama proposed a minimum 30 percent tax rate on Americans earning more than $1 million a year. The proposal — known as the “Buffett Tax” after Warren Buffett famously said his secretary pays a higher tax rate than he does — was a key part of the president’s populist push for “fairness” in his speech to the nation.
The plan is “designed to come at me if I’m the nominee,” Romney said in an interview that will air tonight on The Kudlow Report. “If I happen not to be the nominee, he’ll still take the 99-versus-one attack. He’s really trying to divide America.”
Romney, who gave a glimpse inside his personal fortune on Tuesday by releasing his U.S. tax returns, paid an effective tax rate of 13.9 percent in 2010 and expects to pay a 15.4 percent effective rate when he files his return for 2011.
Those rates are far below the top income-tax rate on wages, which is 35 percent, because the U.S. tax code favors capital gains and other investment income by taxing them at 15 percent.
“The question is whether we’re going to eliminate the capital-gains tax break,” Romney said. “So if you say we’re going to raise that dramatically, you’re going to choke off a lot of the capital that goes into creating new enterprises and creating jobs. It’s the wrong way to go.”
Romney said Republicans are not all about the rich. “I’m fighting to help middle-class Americans get better jobs and better incomes,” he told me. “People who have been successful understand the path to success — we want everyone to enjoy success in America.”
Tune in to tonight’s Kudlow Report on CNBC (7:00 p.m., ET) to see the entire interview.
Senate Minority Leader Mitch McConnell (R., Ky.) told me on Monday night’s Kudlow Report that President Obama shouldn’t expect a lot of cooperation from Republicans after he outlines his goals for 2012 during the State of the Union address tonight.
“With the Obama economy established now . . . unemployment is still at 8.5 percent,” McConnell said. “It didn’t work, and we’re not interested in doing more of the things that don’t work.”
Obama is expected to use his State of the Union address to call for higher taxes on the rich, among other things. And while it sounds like more gridlock ahead in Washington, McConnell puts the blame squarely on the president. He said when Republicans wanted to tackle tax reform and entitlements last year, Obama went AWOL on his bus tour. McConnell expects more of the same this year.
“He was not involved whatsoever,” McConnell said. “So I’m not optimistic, frankly, that in an election year that he’s likely to be any more engaged than he was last year.”
What’s more, McConnell thinks the logjam in the nation’s capital is part of Obama’s agenda.
“That’s his strategy . . . to demonize Congress, to complain because he can’t continue to get everything he wants, like he did the first two years,” he said. “It’s all about his reelection and not about the country.”
One thing McConnell thinks will get done is an extension of the payroll tax cut, which was extended for only two months in December when Congress couldn’t come to an agreement.
“We’ll be back at [it] trying to figure out how to do that for the balance of the year and how to pay for it,” he said. “We don’t want to add to the deficit.”
Let me build on Charles Krauthammer’s great Friday column, “The GOP’s Suicide March.” Krauthammer argues that just as President Obama’s class-warfare, soak-the-rich mantra started lagging in the polls, some Republicans on the campaign trail started making the case that Mitt Romney’s Bain Capital was involved in nothing more than vulture capitalism, looting companies, and destroying jobs. Keeping class envy alive.
I’m not going to name names, because everybody knows who these Republicans are. Instead, I want to go positive, and commend Mitt Romney himself. Romney did his best in the second South Carolina debate to fight for free-market capitalism and Adam Smith, and against the spread of Obama-style crony capitalism and class envy.
Might a strong Newt Gingrich debate performance tonight trump the ABC Nightline interview with Newt’s ex-wife Marianne? Remember, the debate comes before Nightline. And the roughly five million to six million people who watch the debate will be a lot more than the roughly two million folks who turn on Nightline. Plus, the Nightline crowd is largely liberal, and these viewers are not going to favor Newt Gingrich.
I’m not saying the ABC Brian Ross interview with Marianne isn’t something. But I’m not sure how important it really is.
Here’s what’s more important: Newt has opportunities in the debate tonight to push his Reagan 2.0 supply-side tax-reform plan. If he stays on message about growth, jobs, and prosperity, he can point to Mitt Romney’s more timid tax-reform plan.
Plus, Newt needs to explain how the numbers work both for his 15 percent flat tax and his plan for Social Security personal accounts. Growth is great, but we also have this problem called the budget deficit. Newt needs to explain.
Mitt Romney has opportunities tonight also. He needs to announce an early release of his tax returns. He also should explain that his investment income, which is taxed at a 15 percent effective rate, is also taxed at the corporate level. So in fact, Mitt is paying a combined 45 percent tax rate on his income.
And while he’s at it, Mitt should unveil (unleash?) his own bolder tax-reform plan. Most people agree that Mitt has the business experience and the better understanding of how the economy works. But he needs a bolder solution. Tonight could be the night.
And while he’s at it, Mitt should give a more detailed defense of both the successes and failures of Bain Capital. Details matter. And perhaps he can aggressively tell folks how a Bain-turnaround approach is exactly what’s needed for that troubled and near-bankrupt company, U.S. Government, Inc.
Finally, both Newt and Mitt should take on the cronyism in Washington. They should describe how they would end corporate welfare; how they would remove the costly and unnecessary deductions, exemptions, and carve outs in the tax code; and how they would get rid of all the government subsidies to big business for energy, exports, and agriculture (and ethanol). Changing Washington’s culture of cronyism is a key path to tax reform, deep spending cuts, and deficit reduction — along with growth.
In other words, in a dead-heat race in South Carolina, both Newt and Mitt have big opportunities in tonight’s debate.
There’s a very troubled company out there called U.S. Government, Inc.It’s teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff, and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring.
While so much attention has been turned to Newt Gingrich’s catastrophically mistaken attack on Mitt Romney’s Bain Capital, free-market capitalism, investment, and profits, a potentially much more significant development occurred in the New Hampshire debate Saturday night. For the first time, Mitt Romney embraced a much bolder tax-reform plan.
Under pressure from a number of supply-side conservatives (including me, and most especially the editorial-page folks at the Wall Street Journal), Romney appears to be listening.
Republican presidential hopeful Jon Huntsman took aim at front-runner Mitt Romney on the eve of the New Hampshire primary, telling me that he’s the best candidate to unseat President Obama in November.
Huntsman, former governor of Utah and U.S. ambassador to China, said Romney is making himself “completely unelectable” when he makes statements like the one he made Monday about firing people. During a speech to business leaders, when talking about how people should be able to chose their own health insurance, the former Massachusetts governor said: “I like being able to fire people who provide services to me.”
“Words and statements matter . . . when you are in a heated campaign,” Huntsman said on The Kudlow Report. “I just want to make sure we can get somebody who can go up against Barack Obama and not be chewed up by the political machine that’s going to have a billion dollars to spend on it.”
To take on Obama, the candidate has to be able to get more than just Republican votes, and Huntsman said he’s the man who can deliver.
“In order for someone to beat Barack Obama this year, they’re going to actually have to convince people who supported Barack Obama last time to support them,” he said. “If you can’t come out of New Hampshire or any other primary state with the Republicans and also a whole lot of independents, than we’re not going to have an electable candidate at the end of the exercise.”
Huntsman, who skipped the Iowa caucuses last week to focus on New Hampshire, is pinning his hopes on a strong showing in the Granite State’s first-in-the-nation primary today. While he lags far behind Romney, some polls show him moving into third place. According to Monday’s Suffolk University tracking poll, Huntsman has 13 percent of likely voters supporting him. Romney has 33 percent, down from 43 percent one week ago, and Rep. Ron Paul is at 20 percent.
Huntsman also took issue with Romney’s criticism of his service as ambassador to China under Obama. During Saturday’s debate, Romney reprimanded Huntsman for implementing the policies of the Obama administration instead of helping Republicans across the country get elected. But Huntsman said his dedication to his former job should win him favor with voters.
“People want a leader who actually believes in putting their country first,” Huntsman told me. “And Governor Romney made it very clear [during the weekend debates] that he believes in putting politics first.”
Huntsman also disagrees with Romney’s stance on penalizing China for currency manipulation.
“If [Romney] imposes a tariff the first day he’s in office, as he has threatened to do, you will have retaliation immediately on the part of the Chinese and it will result in a trade war,” he said. “That is an absolutely nonsensical approach to doing business.”
While the Chinese aren’t appreciating their currency at a speed Huntsman would like, he said the solutions need to be found during negotiations.
But he wouldn’t join in the chorus of Republican candidates attacking Romney for his work as a venture capitalist. Instead, he thinks the front-runner’s record as governor is the bigger issue.
“[Massachusetts] placed 47th in job growth in this country,” Huntsman said. “[Romney] didn’t put forward any big, bold tax-cut proposals, he didn’t put forward any tax-cut offerings to his legislator, he didn’t do anything big, bold, and courageous.”
Utah, on the other hand, was number one in job growth, delivered a flat tax, and reformed health care and education during his tenure, he said. “What’s most germane here is our records as governor,” said Huntsman.
Message to my fellow conservatives: Please don’t blame the mainstream media for the improvement in jobs, unemployment, and economic growth. Reporters are not making this up. The economy is better. It’s going to give President Obama a leg up on the election. GOP beware, and come to your senses.
My column quoted Kudlow calling Santorum’s economic plan “terrible,” because it favors manufacturers by lowering their corporate income tax rate to 0 percent, while not doing the same for non-manufacturers. Kudlow says I accused him in the column of being anti-blue-collar. I certainly wrote that many Republicans are, but I don’t agree that my column leveled this accusation specifically at Kudlow.
He wrote:“The Keystone opposition coming out of the White House is completely alienating all these people, the folks who work with their hands. And it’s these workers who have been decimated in the recession far more than any other group in the economy.”
Kudlow and I have our disagreements about bailouts and taxes (and the meaning of my latest column), but on these points, we agree: 1) Santorum is wrong to pick winners and losers, and 2) many economy-distorting policies need to be fixed, but the policies that hurt blue-collar workers impose unique costs.
– Tim Carney is senior political columnist for the Washington Examiner.
A day after coming in third in the Iowa Republican presidential caucuses, Ron Paul set his sights on New Hampshire and took aim at Rick Santorum. He also declared he had no intention of leaving the Republican party.
Santorum is a typical “big-government Republican” who is not really conservative, Paul told me Wednesday night. He said that he’s the true fiscal conservative who believes in free-market economics, adding that both Santorum and Newt Gingrich don’t understand that concept.
“I think they think in terms of patching up things, and maintaining the status quo, and don’t rock the boat and you can’t cut anything,” Paul said. However, Paul noted that former Massachusetts governor Mitt Romney deserved a “little bit of credit” for working in the private sector.
Santorum, a former U.S. senator, finished just eight votes behind Romney in the Iowa caucuses. But Paul, who did well among independents and younger voters in Iowa, says he can bring those votes to the GOP. He also slammed those who tried to vilify his supporters throughout the campaign.
“I thought the party was a broad tent, a big tent, [that] brings people in . . . but aren’t young people pretty important?” he said. “I get real energized when I go to the campuses and talk about economic policy and talk about gold standards and things like this, but they don’t want to invite these people in.”
But while his libertarian views may have brought in independent voters, Paul dismissed the idea of running as an independent.
“Right now I’m doing so well, why would I think about it?” he said. “I was raised in a Republican family. I was elected twelve times to Congress as a Republican.”
“The purpose of economic policy is growth, jobs, and prosperity,” supply-side founder Art Laffer told me today. As such, Laffer has endorsed Newt Gingrich and the Gingrich 15 percent flat-tax plan, which includes the 12.5 percent corporate-tax reform. “It’s nothing against the other candidates,” Laffer said. “But Newt’s plan is right, and therefore endorsing him is the right thing to do.”
Laffer is concerned with the fact that Mitt Romney has no tax-reform plan, and he worries that Romney doesn’t believe in the incentive model of economic growth. “He’s a good man,” Laffer said. “And he would make a good president. But he needs a bold tax plan.”
Art Laffer believes the Gingrich plan would help jolt the economy to 4 or 5 percent growth. And he also is impressed that Gingrich has been talking about King Dollar on the campaign trail along with his supply-side tax strategy.
Was Gingrich actually one of the original supply-siders? Well, no. But he did hang around with Jack Kemp and others during the early 1980s in what became known as the Opportunity Society. So Newt’s bona fides are there.
Laffer also is impressed with Gingrich’s bipartisan abilities. He noted that Newt worked with Bill Clinton during the “Contract with America” 1990s to get welfare reform and a lower capital-gains tax.
What about the inevitable criticism from Obama that a flat tax is a huge tax cut for the rich? “Listen,” Art told me. “We want to make the poor, rich. And you can’t love jobs while hating job-creators.”
Whether Gingrich’s supply-side bus tour and Art Laffer’s endorsement help him in the remaining days of the Iowa campaign remains to be seen. Polls suggest that Newt is a stock still looking for a bottom. His campaign to use federal marshals to haul judges before Congress is way off the economic-growth message and did him a lot of damage. That’s what the latest polls suggest.
Now, if Gingrich can stay on message, and stick with supply-side solutions for growth, jobs, and prosperity, he could still bounce back over the next five days. But he must be disciplined and stay on message.
When you think of Republican congressman Paul Ryan, terms like earnest, serious, and important come to mind. So does the term old-fashioned. Ryan comes from an old-fashioned place, the blue-collar town of Janesville, Wisconsin. He cherishes the old-fashioned values of a faithful family man. He even looks old-fashioned, with his white shirts and striped ties. And he uses old-fashioned argument skills, persuasively weaving big-picture themes with the numbers that back them up.
And Ryan has old-fashioned goals, too, like saving America from fiscal bankruptcy, economic stagnation, and a European-style entitlement state.
“Just look at what happened across the Atlantic,” Ryan told me in a year-end interview. “We have to avoid that. We must reclaim our founding principles of economic freedom and free markets. We must preserve the American Idea.”
With this vision, and with a pro-growth budget framework called “A Roadmap for America’s Future,” Ryan’s serious ideas have seriously gotten under President Obama’s skin.
Color me cranky about this week’s Republican presidential debate in Iowa. The headline stories were about whether Newt Gingrich actually lobbied for Freddie Mac, or why Mitt Romney changed his positions on gay rights, guns, and abortion. But a GOP growth message to defeat President Obama was completely missing in this debate. It was a supply-side whiff.
This election is principally about the economy and its poor performance. It’s about the slow rate of growth, the high rate of unemployment, and the tax, regulatory, spending, and monetary obstacles conjured up by Obama that are holding back the animal spirits which are so essential to job creation and prosperity.
Risk-taking is virtually absent today. Business profits are strong, but firms won’t make commitments in front of Obamacare, regulations, mandates, and tax threats. The president is on the campaign trail with a leftist, class-warfare message. He blames successful entrepreneurs for their wealth, and slurs high-powered businesses at every turn. His is a big-government planning vision, an FDR-like vision.
But where was the GOP response in Sioux City, Iowa?
The payroll-tax-cut debate is not really about the payroll tax, which is a very weak-kneed economic stimulant and a lackluster job creator because of its temporary nature. Without permanent incentives at lower tax rates, these rebates don’t do anything for growth and jobs.
Instead, the key to understanding the payroll-tax debate is to grasp Pres. Barack Obama’s leftist vision of taxing successful earners (the millionaire surtax) and his obsession with clean energy at the expense of fossil fuels. These are ideological positions. They support the Obama vision of class warfare and his attachment to radical environmentalism.
And the key to understanding this state of affairs is the disposition of the TransCanada Keystone XL pipeline, which Republicans cleverly threw into the payroll-tax debate as the only real job creator.
Senate Minority Leader Mitch McConnell says a Democratic plan to concede on a millionaire tax in order to get Republicans to pass an extension of the payroll tax likely won’t be enough to get an agreement.
“The tax they wanted to implement on business owners was something that couldn’t pass the House and couldn’t pass the Senate,” McConnell told me on Wednesday’s Kudlow Report. “So if they are giving up on that, they are giving up on something that couldn’t have cleared either body anyway, so I don’t know [how] far we’re down the path to an agreement.”
President Obama and fellow Democrats are now considering dropping the 1.9 percent surtax on income above $1 million a year that they wanted to pay for the payroll tax. But if Republicans are going to agree to extend the payroll tax cut — which expires on Dec. 31 and affects 160 million Americans — they want something in the bill that saves and creates jobs, McConnell said. The Keystone oil pipeline project between the U.S. and Canada will create jobs, he added, and therefore it “needs to be part of the package.”
The U.S. on Wednesday faced the prospect of an imminent government shutdown for the third time this year as a fight between lawmakers in Congress over taxes and spending turned nastier. Democrats, led by President Obama, are refusing to sign off on a bipartisan $1 trillion government-funding bill that would keep federal agencies operating beyond Friday until Republicans agree to a compromise deal on the payroll tax cut. On Tuesday, the House passed its version of the payroll tax bill, which Senate Majority Leader Harry Reid has vowed to kill.
However, McConnell has said he wants to turn first to the government-funding bill. McConnell told me that funding had been agreed upon in conference until Obama stepped in and played politics.
“Now they’ve got us two days away from a government shutdown, all instigated by the president himself,” he said. “When do you turn off the campaign? When do you take responsibility for governing?”
Bob Doll, chief equity strategist at BlackRock, told me on Monday’s Kudlow Report that while Europe still struggles with its debt crisis, things are moving in the right direction in the U.S. and China. And he thinks cyclical stocks will reap the benefits.
A few months ago, according to Doll, “the U.S. was heading into a recession, Europe was falling apart, China was going to have a strong landing, and we had a lot of tightening going on.” Now, Doll says the U.S. economy is showing a little growth and China is “a little less bad, maybe eventually good.”
“I think cyclicals will benefit,” he added.
Stocks tumbled Monday, with the Dow dropping 163 points, after investors soured on a European Union plan adopted last week to enhance fiscal discipline in the eurozone in the hopes of quelling a two-year-old debt crisis.
There will be days like this when the market doesn’t think Europe can rescue its banks in time, Doll said. But he pointed out that it is not a “one way street.” And despite the volatile market, he thinks things are looking a little better.
“I think we are better off today than we were a week ago, but we’re still not where we need to be,” Doll said.
He also added that what’s happening in China is important to the global economy, noting that China’s inflation rate in November fell to the lowest level in more than a year. Said Doll, “This is a step in the right direction that should allow more reserve-requirement reductions.”
Following the GOP debate that nearly the whole world watched on Saturday night, the president on Sunday made it very clear that he will not back off his class-warfare vision in the coming year. Obama told Steve Kroft on 60 Minutes that middle-class inequality will be his big theme, and that somehow successful earners, investors, and small-business owners are to blame.
The president said that while fat-cat incomes went up 200 to 300 percent over the last few decades, middle-class incomes didn’t grow. This is not true, according to James Pethokoukis, whose blog posts citing various studies show that real median income rose at least 40 to 50 percent.
In any case, whatever the exact numbers, it’s still a mystery to me why successful people getting ahead cause anybody to fall behind. The Jack Kemp idea was always to foster a rising tide that would lift all boats. How can this happen if we penalize success and raise top tax rates on work and investment to 50 percent or more? That’s a mystery.
I should think, in a system of democratic capitalism, that more millionaires are a good thing. Show me a system of redistribution, and I’ll show you a system of economic stagnation.
Elsewhere in the interview the president said he did not overpromise on the results of his stimulus package. But actually, according to the original February 2009 stimulus documents, today’s unemployment rate should be close to 6 percent, not 8.6 percent. The president is now backing off by saying economic recovery is a long-term project that will take more than one term and more than one president.
By the way, Obama told the Today Show’s Matt Lauer in February 2009 that if he doesn’t “have this done in three years, then it’s going to be a one-term proposition.”
Which leads me to this thought regarding the GOP race: Since we basically know what Obama’s vision will be, which candidate will be better at besting Obama and his vision?
It’s going to be a battle between FDR’s 1930s and Ronald Reagan/Jack Kemp prosperity optimism.