Kudlow’s Money Politics

Mitt Gets the Supply-Side Approach

When former President George W. Bush cut taxes, including his 2003 reduction in tax rates on investment, he always referred to it as putting more money in people’s pockets. I don’t want to be unfair, because the 2003 tax cuts were his best policy move. But Bush was never a supply-sider. Putting more money in people’s pockets is a demand-side argument.

Contrast that with Mitt Romney’s tax-policy speech today at the Detroit Economic Club, where he touted his new across-the board 20 percent reduction in personal tax rates. The language is crucial: “By reducing the tax on the next dollar of income earned by all taxpayers, we will encourage hard work, risk-taking, and productivity by allowing Americans to keep more of what they earn.”

This is supply-side language. It is incentive language.

Many of us have been asking whether Romney understands the incentive model of growth. Namely, keeping more of what you earn, invest, or risk provides a bigger reward. And those rewards translate into a fresh tonic for economic growth.

Ronald Reagan understood this when he famously told people that he quit working as an actor because he only made about 10 cents on the extra dollar earned from the extra movie. Mitt Romney seems to understand this incentive model.

His tax-cut plan is not perfect. Instead of retaining all six brackets of the personal income tax, I wish there were only two brackets or maybe three for a modified flat tax. But it’s clear that Romney understands the incentive value of his 20 percent marginal rate cut. He is satisfactorily answering the question that I and others have posed about his understanding of the supply model.

Reward more and you’ll get more. It’s not just a one-time benefit of more cash. New tax incentives at the margin change economic behavior for the better.

I will have more to say on the Romney plan overall, and about how it contrasts hugely with Obama’s massive tax-rate hikes. But for now I am satisfied that Mitt gets the supply-side approach. 

Larry Kudlow is the author of JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

Most Popular

Media

‘Anonymous’ Falls Flat

On the menu today: The op-ed page of the New York Times made the deliberate decision to hoodwink America about the identity of “Anonymous”; the sense of guilt that pervades legacy media -- a very apt label; and wondering whether or not we will even see long lines on Election Day with early voting being so ... Read More
Media

‘Anonymous’ Falls Flat

On the menu today: The op-ed page of the New York Times made the deliberate decision to hoodwink America about the identity of “Anonymous”; the sense of guilt that pervades legacy media -- a very apt label; and wondering whether or not we will even see long lines on Election Day with early voting being so ... Read More

Another Pollster Sees a Trump Win

The Trafalgar Group’s Robert Cahaly is an outlier among pollsters in that he thinks President Trump will carry Michigan, Pennsylvania, or both, and hence be reelected with roughly 280 electoral votes. (I explained his thinking here.) Last week another pollster, Jim Lee of Susquehanna Polling and Research, ... Read More

Another Pollster Sees a Trump Win

The Trafalgar Group’s Robert Cahaly is an outlier among pollsters in that he thinks President Trump will carry Michigan, Pennsylvania, or both, and hence be reelected with roughly 280 electoral votes. (I explained his thinking here.) Last week another pollster, Jim Lee of Susquehanna Polling and Research, ... Read More
White House

Hell, Yes

Editor’s Note: If you would like to read more pros and cons on voting for President Trump, further essays on the subject, each from a different perspective, can be found here, here, here, here, and here. These articles, and the one below, reflect the views of the individual authors, not of the National ... Read More
White House

Hell, Yes

Editor’s Note: If you would like to read more pros and cons on voting for President Trump, further essays on the subject, each from a different perspective, can be found here, here, here, here, and here. These articles, and the one below, reflect the views of the individual authors, not of the National ... Read More
Economy & Business

Daylight Savings Forever

Before I became a parent, I didn't have especially strong feelings about the time shifting by an hour twice a year. Like most people I was aware of the downsides -- increased car accidents, schedule confusion, etc. -- and I figured it would be better to knock it off. But I didn't feel personally offended by ... Read More
Economy & Business

Daylight Savings Forever

Before I became a parent, I didn't have especially strong feelings about the time shifting by an hour twice a year. Like most people I was aware of the downsides -- increased car accidents, schedule confusion, etc. -- and I figured it would be better to knock it off. But I didn't feel personally offended by ... Read More