The Economist
Tim Pawlenty's economic plan
Moving right, way right
YESTERDAY I had plans to write a very convincing blog post on why Tim Pawlenty would win the Republican nomination. My prediction revolved around the idea captured in this "Saturday Night Live" skit, which posits that you can't tell many of the serious Republican candidates apart.
My theory was that a majority of Republican primary voters would decide that Hunt Mitchman was their best chance to beat Barack Obama, and that Tim Pawlenty was the most believably conservative and least threatening of the Hunt Mitchman types, so voters would eventually move into his camp. This is an extension of the placebo argument that I put forward in a previous post.
But perhaps Mr Pawlenty is not convinced of this theory. Perhaps he agrees with Jonathan Bernstein, who yesterday morning—after hearing Rick Santorum argue that Paul Ryan's Medicare plan didn't go far enough—proposed that the largely indistinguishable candidates have a serious incentive to differentiate themselves from each other. And, yesterday afternoon, Mr Pawlenty tried to do just that, proposing an economic plan that harkened back to the early 1980s. In return, he received what must have been a pleasing headline from the New York Times.
He also received plenty of ridicule. Mr Pawlenty's optimistic plan aims for 5% growth over ten years. Why no other candidate has proposed this is beyond me—people like growth, stupid. And "it's been done before", he says.
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.
Never mind that neither of those expansions lasted five, let alone ten, years, or amounted to 5% growth. The key is you really have to want 5% growth, and Barack Obama obviously doesn't. Under Mr Obama tax rates are about where they were during that Clinton boom—as a percentage of GDP taxes are actually lower than under Clinton or Reagan—and apparently that's too high. So Mr Pawlenty would slash the corporate income tax rate and flatten the individual income tax into two brackets: 10% for income under $50,000 and 25% for income over that amount. Now you might be thinking about the devastating effect that would have on the deficit. But you forget that the economy will be growing by 5% over ten years thanks to those tax cuts, generating increased revenue that will naturally lower the deficit. For an example of how this will all work in practice, see the Bush tax cuts. Or, if you're Mr Pawlenty, ignore them.
On spending, Mr Pawlenty is more vague—he wants a constitutional amendment that would cap federal spending at 18% of GDP. Glenn Kessler points out that "after the Reagan and Bush tax cuts, tax receipts as a percentage of GDP dropped well below 18%". He adds that the candidate "is proposing so much deficit reduction that he cannot meet his goal even by eliminating ALL spending on nondefense discretionary programs." But again, never mind all that.
The purpose of Mr Pawlenty's speech was not to lay out a rational economic policy fit for a president. The purpose was to lay out an irrational economic policy fit for Republican primary voters. And, just as important, to lay down a marker for Mitt Romney, Mr Pawlenty's main Hunt Mitchman rival and the current frontrunner. By staking out ground so far to the right, he now forces Mr Romney to forge an even zanier economic scheme, lest he be accused of dishonouring the legacy of Reagan (as defined by people far to the right of Reagan). It's a canny political strategy.
And it's awful for America. As the candidates try to out-tea-party one another, they push the Overton window of acceptable economic policy to the absurd right. This makes it much more difficult for a reasonable Republican candidate to win office, and for any Republican politician to support reasonable economic policy. And no matter what party you belong to, you should find it troubling that Mr Pawlenty's ridiculous economic plan could ever be considered acceptable by a large portion of the population.
http://www.economist.com/blogs/democracyinamerica/2011/06/tim-pawlentys-economic-plan
No comments:
Post a Comment