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June 07, 2011

Tim Pawlenty: Hey, How About Some Real Economic Growth

Via James Pethokoukis, Tim Pawlenty is giving an economics speech today. He is live tweeting the speech.

He's also has an op-ed out previewing his arguments.

America's economy is not even growing at 2 percent — and that's what many projections say we can expect for the next decade. That's not acceptable.

Let's start with a big, positive goal. Let's grow the economy by 5 percent, instead of an anemic 2 percent.

It's been done before: Between 1983 and 1987, the Reagan recovery grew at 4.9 percent annually. Between 1996 and 1999, under President Bill Clinton and a Republican Congress, the economy grew at around 4.7 percent annually.

In each case, millions of jobs were created, incomes rose and unemployment fell to historic lows. The same can happen again.

...

We should cut the corporate tax rate by more than half. I propose reducing the rate to 15 percent from 35 percent, recognizing that the tax code is littered with special interest handouts, carve-outs, subsidies and loopholes that should be eliminated.

But just changing business tax rates is not enough. That's because we know most job growth will come from small and medium-size businesses, and their owners are taxed under individual tax rates, not corporate rates. So, pro-job and pro-growth tax reform must include individual tax reform as well.

Five percent economic growth over 10 years would generate $3.8 trillion dollars in new tax revenues. With that, we would reduce projected deficits by 40 percent — all before we made a single budget cut.

The other 60% he says should come from spending cuts.

The crisis that we face requires immediate action. That's why I have proposed capping and block-granting Medicaid to the states, raising the Social Security retirement age for the next generation and slowing the rate of growth in defense spending.

I will also call for Congress to grant the president the temporary and extraordinary authority to freeze spending at current levels, and impound up to 5 percent of federal spending until the budget is balanced.

As an example, cutting even 1 percent of overall federal spending for six consecutive years would balance the federal budget by 2017.

He also calls for passing a balanced budget amendment but doesn't seem to put much stock in it. I think it's a box a lot of conservatives want checked but I don't get why.

First, if you could get enough votes to pass it (two-thirds in both houses before it even goes to the states) you'd have more than enough votes to pass an actual balanced budget.

More importantly, to me balancing the budget is a secondary issue to the level of spending. You can find a way to balance the budget at current Obama levels of spending but that would be a disaster. I'd rather a smaller, more prudent level of deficit at significantly lower levels of spending.

To my mind, the issue isn't simply economics, it's freedom. A less intrusive government tightly boxed into to its proper role should be the real goal.

As for the politics, if it comes down to Romney vs. Pawlenty, at this point I'd lean to Pawlenty. Yes, they both have sinned against conservatism but I think both have a real shot at beating Obama. Pawlenty simply has less baggage than Romney. Mitt is going to spend so much time playing defense in the primaries and genaral, I'd rather a guy like Pawlenty who is at least talking the talk at this point have a shot with a cleaner slate.

Either way...still a long way to go.


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posted by DrewM. at 11:11 AM

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