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. That’s right: 5 percent. Pawlenty calls this target aspirational.
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.
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-decade-long boom. Actually, the first couple years of the Reagan recovery came in at over 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 Pres. John F. Kennedy also had a 5 percent growth target, a response to Ike’s three recessions. 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.
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.
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. Small businesses and brand-new start-ups 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.
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.
Get the Market Movements in Advance: William's Edge Webinar for Monday, March 10th, 2014 | John Ransom