Tim Pawlenty gave a major speech on the economy this month in which he made some major proposals on tax cuts, the deficit, and economic growth. Pawlenty had the speech critiqued by the Fact Checker over at the Washington Post, who gave Pawlenty “two Pinocchios” for some of the economic assumptions underpinning his policy goals. In particular the idea that you could achieve five percent growth for a sustained period of time is not borne out by history.
Pawlenty’s goal of 5 percent annual growth in the gross domestic product strikes us as rather ambitious. He essentially admits this when he notes that Ronald Reagan achieved 4.9 percent growth between 1983 and 1987 and that Bill Clinton achieved 4.7 percent growth between 1996 and 1999. Both of those results came after recessions. Pawlenty, who proposes dramatic cuts in taxes, does not note that Clinton’s stellar economic performance was achieved even though he raised taxes on the wealthy.
Of course Pawlenty blames health care price escalation on President Obama’s health care reform effort, even though the law does not take full effect until 2014. Another Pawlenty article of faith is that even with the steep cuts he proposes to tax rates revenue will come in at 18% of GDP. On that score I say show me. Paul Ryan has struggled to answer that same question, and the stock answer seems to be that revenue will come in that way regardless of tax rates because it always has. Hmmmm. The Wall Street Journal editorial page generally liked the Pawlenty approach, but they are not afraid to show their true colors when it comes to deficit reduction.
More problematic is Mr. Pawlenty’s endorsement of a balanced budget amendment. Leave aside that changing the Constitution is (rightly) a very heavy political lift, and that short-term deficits can be useful, as in the 1980s to finance the defense buildup that helped to end the Cold War. The more fundamental problem is that a balanced budget rule can easily become an excuse to raise taxes, as it often has at the state level. Mr. Obama would gladly balance the budget at 24% of GDP, or more.
The Journal editorial page has always shunted aside deficit concerns in favor of tax cutting. They are also not afraid to call for huge spikes in certain federal spending that they feel important, as long as it is done with borrowed money. See the support for military spending cited above. The Journal’s editorial slant is the real Republican position, but those Republicans in Congress cannot be so upfront about their lack of real concern for deficit reduction. They advocate “deficit reduction”, but in reality it is not a true policy goal for them. More tax cuts hidden in deficit reduction packages that do not actually solve our debt problem is the real goal. Tim Pawlenty has decided to sell Republican primary voters what they want to here, rather than telling the truth. Read the Scott Lehigh column on Pawlenty’s proposals here.