- Former Minnesota governor Tim Pawlenty turned out a blockbuster
economic-growth plan this past week, including deep cuts in taxes, spending
and regulations. It's really the first Reaganesque supply-side growth plan
from any of the GOP presidential contenders. And he caps it all off with
a defense of optimism as he charges ahead with a national economic growth
goal of 5 percent.
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- That's right: 5 percent.
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- Pawlenty calls this target aspirational. OK, fine. But
deeper down, he's basically saying no to the declinists and pessimists
who seem to populate the economic landscape these days. Big government
doesn't work. Let's try something different.
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- Ronald Reagan always believed that America is exceptional.
By removing obstacles to growth, the Gipper held that economic policies
could unleash a massive outpouring of risk-taking, creativity and entrepreneurship.
He was right, and his policies launched a two-decades-long boom.
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- Actually, the first couple of years of the Reagan recovery
came in at more than 7 percent. And as Pawlenty noted in his speech at
the University of Chicago this week, between 1983 and 1987, the Reagan
recovery grew at 4.9 percent annually. I note that President John F. Kennedy
also had a 5 percent growth target, a response to Ike's three recessions.
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- So while those on the left criticize Pawlenty, and while
even some conservatives scoff at his growth target, history says we've
been there before.
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- The Wall Street Journal editorial page calls it a "growth
marker." Famed CEO Jack Welch calls it a vision for America. I think
it's an act of great leadership.
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- The details of Pawlenty's economic program are very similar
in scope and structure to Reagan's. Slash tax rates. In particular, the
single-best Pawlenty proposal is to take the business tax rate all the
way down to 15 percent from 35 percent, get rid of all the deductions and
quit taxing foreign earnings of American companies. Critically, he would
make small-business S-Corps or LLC partnerships eligible for the new low
corporate rate.
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- Small businesses and brand-new startups have faltered
during the Obama years. They should be the engine of job growth, but it's
not happening. Under Pawlenty's plan, however, their rewards for new pass-the-hat
investments among friends and families would be lifted by more than 40
percent on a take-home-pay basis.
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- The former college hockey player also would reform the
personal tax system by moving to two rates of only 10 and 25 percent. And,
get this: He would abolish taxes on capital gains, interest, dividends
and estates. He'd also sunset all economic regulations. And he'd apply
a "Google test," whereby if you can find a federal government
good or service on the Internet, the federal government doesn't need to
run it. That means the Post Office, the Government Printing Office and
Amtrak could be sold off, privatized or leased out.
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- The governor also comes out for a strong King Dollar,
with a blistering attack on the Bernanke Fed's loose-money policies. He
also offers up an outline for entitlement reform, along with a 5 percent
budget-impoundment approach until such time as the budget is balanced.
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- Quintessentially, Pawlenty has delivered a private-sector,
free-enterprise vision of economic growth and jobs, saying: "Markets
work. Barack Obama's central planning doesn't." It's in this spirit
that he would repeal Obamacare, which is one of the greatest job-blockers
of all right now, with its maze of tax-and-regulatory interventions into
the private economy.
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- But let me return to the key point -- Pawlenty's 5 percent
growth vision for America. He's not going to accept some kind of "new
normal," 2 percent growth rate.
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- Smaller government, lower tax rates, fewer economic regulations
and sound money were tried down through the 20th century by Calvin Coolidge,
John F. Kennedy and Ronald Reagan. These policies worked. Over the past
decade, however, the historic postwar U.S.-growth baseline of 3.4 percent
per year has been dismantled. Through 2010, actual growth is nearly 20
percent -- or close to $3 trillion -- below the historical norm. Pawlenty
is saying we have to do our best to close that humungous output and jobs
gap.
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- He also notes that by reigniting growth and a stronger
jobs market that demand for government-spending assistance will come down
while tax revenues will go up. In other words, we'll never solve the spending-and-borrowing
problem without a major increase in growth.
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- Is he serious? Of course he is. And he's pretty darned
specific. Remember, this is a guy who said no to ethanol subsidies in Iowa,
yes to extending the Social Security retirement age in Florida and no to
crony capitalism for Wall Street banks in New York.
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- In other words, Tim Pawlenty is a tough hombre.
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- If he stays on message unrelentingly, his growth plan
could carry him right to the White House.
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- Lawrence Kudlow is host of CNBC's The Kudlow Report and
co-host of The Call. He is also a former Reagan economic advisor and a
syndicated columnist. Visit his blog, <http://www.kudlowsmoneypolitics.blogspot.com/>Kudlow's
Money Politics.
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- Copyright 2011, Creators Syndicate
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