I want to take Republicans seriously, but they do make it hard. The moment I say something kind about Mitt Romney ("He is in many ways a capable and effective candidate") he criticizes Obama for throwing Israel under the bus by uttering the phrase "1967 borders" in the course of reaffirming long-standing US policy. That learned me. Now Tim Pawlenty soars to far greater heights of nonsense with his proposals on the economy.
Let's start with a big, positive goal. Let's grow the economy by 5%, instead of the anemic 2% currently envisioned. Such a national economic growth target will set our sights on a positive future. And inspire the actions needed to reach it. By the way, 5% growth is not some pie-in-the-sky number. We've done it before. And with the right policies, we can do it again.
Between 1983 and 1987, the Reagan recovery grew at 4.9%. Between 1996 and 1999, under President Bill Clinton and a Republican Congress the economy grew at more than 4.7%. In each case millions of new jobs were created, incomes rose and unemployment fell to historic lows. The same can happen again.
Growing at 5% a year, rather than the current level of 1.8%, would net us millions of new jobs. Trillions of dollars in new wealth. Put us on a path to saving our entitlement programs. And balance the federal budget...
5% economic growth over 10 years would generate 3.8 trillion dollars in new tax revenues.
I'm wondering why nobody thought of this before. Just grow at 5% a year. Job done.
Drop-down image credit: Reuters
Also, he says, cap federal spending at 18% of GDP. Meanwhile, cut "just 1% of federal spending for 6 consecutive years" to balance the budget by 2017. See how the problems simply dissolve? Demographic pressures? Capped. Health care costs? Capped. He does mention the need to raise the Social Security retirement age for "the next generation", though one wonders why that would be any more necessary than, say, reforming Medicare (not discussed). It's already capped!
Let's not forget revenues. He proposes to cut income tax rates dramatically (without reforming tax expenditures: nice touch) and to eliminate taxes on capital gains, dividends and interest altogether. That might reduce revenues in the short term. It could slightly widen income inequality. But remember the economy would be growing at 5%.
Everything would work out, in fact, because the economy would be growing at 5%. And public spending would just be capped. I think it's brilliant. If I were Pawlenty, my only worry would be that somebody now suggests a growth rate of 6%. I'm just doing the sums here and I think that would be even better.