Skip to comments.Our Next President Must Focus On One Number: 5% GDP Growth
Posted on 05/29/2011 1:08:45 PM PDT by Texas Peartree
One of the most interesting facets of modern economic policy is the sheer number of numbers. There is the unemployment rate. There is the workforce participation rate. There is the debt level. There is the deficit number. There is the foreclosure rate. There is the economic confidence number. There is the interest rate, and the inflation rate, and the money-supply rate. The point is that we Americans are far too busy (and perhaps economically confused) to look at multiple numbers in order to figure out if we can afford a vacation to Disney World.
In 2012 we should strongly encourage the Republican candidates to focus on one number: yearly GDP growth. Why? The reasons are simple. First, if we can agree that this is the one number that matters, then we can focus our efforts on determining which candidate has an idea of how to get there.
Second, and just an importantly, this would put the spotlight on America's anemic growth rate under President Obama (currently 2.3% according to this week's issue of The Economist). How wonderful would it be to see Pawlenty, and Romney and others arguing over which of them can achieve 5% yearly growth and how?
Third, if you have 5% growth, many of your other problems fade away. Economic growth provides more economic activity and thus more tax revenue, even at lower tax rates. This was the heart of Reaganomics. 5% growth means much lower unemployment, which should shrink the size and scope of government. With more jobs come stabilized housing markets and fewer foreclosures.
Why 5%? Well, a big country like America cannot likely achieve 9% growth like Turkey. Places like Hong Kong (7%) and Singapore (8%) are starting from a much smaller base of economic activity than we are. However, our economy is not so different from mature nations like Germany (5%) or Austria (4%). Over time, no different than compound interests impact on your savings account balance, the difference between a 5% return and a 2% return is enormous. Our future standard of living is completely dependent on our long-term economic growth rate increasing.
For those on the Left who think this is too simplistic and not a worthy goal, it is worth noting that we once had a President who set 5% economic growth as a national goal: John F. Kennedy.
In a recent interview on National Review Online, Larry Kudlow asked House Majority Leader Eric Cantor about this idea of managing toward a specific goal of 5% growth. Cantor instantly saw the logic of managing to a number like that. If 5% growth is your goal, then every regulatory decision and every government "investment" is judged by a simple criterion: does this decision speed up growth?
She will, don’t worry!
Even this morning on one of the Sunday talk shows, Allen West, who I really admire, sat next to some Democrat witch who kept interrupting and hogging the air. "Increase revenue. Increase revenue. Blah, blah, increase revenue.:
Of course, she meant "we have to raise taxes."
West just sat there, mumbled something about Pres Bush spent money ... The answer is "To increase revenue, we have to grow the economy. Tax increases cause the economy to shrink.
The only way to increase revenue is to CUT TAXES.
For heaven's sake, why don't Republicans say this over and over at every situation with democrats.
Don't Republicans know by now how to handle themselves in these events?
Amen. Nothing irritates me more than when folks who are supposedly on our side miss the opportunity to say this.
It’s a no duh. After all, when a business wants to spur activity, the RUN A SALE. That’s what a tax cut is: a “sale” on economic growth. Let’s cut taxes and RUN A SALE ON GROWTH!!
“Don’t Republicans know by now how to handle themselves in these events? “
No, not generally. I wonder if Republicans think it is too risky to try and convince Americans that (a) we have a spending problem, not a revenue problem, and (b) if we lowered taxes we would reap more revenue. I wish someone (Congressman Ryan) would try to make the arguments. It might work.
The GOP is going to raise taxes. They are even calling taxes “Revenue”. It is the new lie.
That’s a No-brainer, we have the Tools in place just need someone to use them,who is NOT a filthy RINO/Democrat.
And the way to increase servitude to government is to raise taxes whether it increases government revenue or not.
They will need to focus on many things, but growing the economy is certainly towards the top of the list.
They will need to be able to clearly articulate *why* the economy needs to grow in very down to earth tones. If they approach it like a dry, dusty, stale CPA, then they may as well speak martian — and the MSM & pundits will be more than happy to step in and “translate” it to the people.
“The only way to increase revenue is to CUT TAXES.”
Reagan’s economic team included spending cuts in their program for good reason. They didn’t believe that cutting taxes would increase total tax revenue. What they did believe is that economic growth spurred by the lowered tax rates would recover a large portion of the revenue loss caused by the tax cuts. And that is what happened.
You can read a first hand description of this from Martin Anderson in his book “Revolution”. Look for the chapter “the myth of the supply-siders”. Anderson was one of Ronald Reagan’s longest serving advisors and was an architect of Reaganomics.
What fans of the idea that tax cuts increased total revenue overlook is that there was a good deal of stimulus going on from deficits in the 80s. Deficit spending by definition is an old Keynesian nostrum, not a supply-side effect, and its impact has to be factored out when trying to isolate the contribution of tax cuts themselves. An accessible study of this was done by Lawrence Lindsey in his book ‘The Growth Experiment’. You can’t just subtract the total tax haul of 1981 from that of 1989 and ascribe all the increase to tax cuts, despite the repeated claims of the Limbaugh/Hannity Radio School of Economics.
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