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Columnist and economic advisor Lawrence Kudlow started out his career as chief economist for several Wall Street firms. He served as the associate...
Read more about Lawrence Kudlow.
Columnist and economic advisor Lawrence Kudlow started out his career as chief economist for several Wall Street firms. He served as the associate...
Read more about Lawrence Kudlow.
Time for a Choice -- Not an Echo
Lawrence Kudlow
Republican Senate leader Mitch McConnell is absolutely right to warn
against Obama's gigantic stimulus-spending package. McConnell says it
"will be the largest spending bill in the history of our country at a
time when our national debt is already the largest in history." As a
result, he says the bill "will require tough scrutiny and oversight."
According to McConnell, scrutiny should include this simple test: "Will the yet unwritten, reportedly trillion-dollar spending bill really create jobs and grow the economy -- or will it simply create more government spending, more bureaucrats and deeper deficits?"
The Republican leader is drawing a clear line in the sand. OK, good. But the GOP has got to do more. It must start talking about tax cuts to grow the economy. And it must get back to the supply-side by talking about lower marginal tax rates on individuals, businesses and investors.
We don't need bailout nation. Nor do we need the government picking winners and losers in a massive Keynesian new-New Deal spending extravaganza. And it's not Obama's middle-class tax cut that's going to get us out of this economic jam. At best, his vision is incomplete. But at worst, his aversion to successful earners and investors is a real obstacle to full economic recovery.
Social historian and early supply-side activist Irving Kristol taught us three decades ago that the top earners are the economic activists. They're the ones with the highest propensity to consume and invest. They're the ones who buy the yachts, which are built by blue-collar workers. And they're the ones who run the small businesses and provide the capital for the new entrepreneurial start-ups that are the lifeblood of the economy. It is they who energize free-market capitalism.
If we had an economy without rich people, we wouldn't have much of an economy. That's why lower tax rates to reward the economic activists -- the most prominent capitalists -- are so essential.
In fact, the GOP has a great opportunity to challenge Obama's Keynesian pump-priming by insisting there be a major tax-cut component in any new fiscal package. Republicans shouldn't merely push for somewhat less government spending. They have to make a bold case that tax rates matter for economic growth and job creation. They must insist that any recovery package includes this key element. Shift the debate. Say clearly that a re-energized economy cannot occur without lower marginal tax rates.
In particular, the GOP position should include lower tax rates on large and small businesses. Right now, the top federal tax rate for C-corps is 35 percent. Small businesses, which pay the individual rate, also are taxed at 35 percent. These rates should be 20 percent for both C-corps and S-corps (including LLCs).
This would make a huge difference. It would be a boon for our global competitiveness, since companies in the United States (as well as Japan) are taxed way above the rates of other advanced countries. It also would attract job-creating investment flows to the United States at a time when capital is on strike in our financial markets and economy. And while businesses collect corporate taxes, it's really consumers who pay the final cost.
Republicans also could promote a middle-class tax cut that would reduce the 28 percent and 25 percent brackets down to 15 percent. And of course, the GOP should work hard to maintain the Bush tax cuts on capital gains, dividends, inheritance and top individual rates.
Senior Obama advisor David Axelrod recently told the Sunday talk-show hosts that the Bush tax-cut package of 2003 is "something we plainly can't afford moving forward." Well, in static terms, the sum-total of the 2003 tax cuts comes to somewhere between $25 billion and $40 billion. Compare that to a trillion-dollar spending plan.
In fact, lower capital-gains tax rates will raise revenues, since this is the single most sensitive tax on the Laffer curve. Indeed, many economists -- including Alan Reynolds at the Cato Institute -- argue that the growth and simplification effects of reducing the corporate tax rate would be revenue positive.
But the congressional Republicans have to step up to the plate right now. Me-too-ism on spending is a big mistake in both political and economic terms. Instead, the GOP should argue that fiscal policy needs a choice -- not an echo (to paraphrase the late conservative stalwart Barry Goldwater).
The whole debate in Washington is heavily skewed toward government spending on infrastructure. It's all spending and virtually no tax cuts. For a more balanced and effective recovery policy, the GOP has to bolster its argument for spending discipline with a loud case for tax cuts.
It truly is time for a choice, not an echo.
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To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.
Copyright 2009 Creators Syndicate Inc.
This news arrived on: 01/01/2009
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Posted Comments:
01-02-2009 19:32
JCE wrote:
The American way used to be to work, build, grow, and lead the world. Now it is to be lazy, greedy, to reward bad behavior, especially in our leaders, penalize the good, and to pay others to live for us. We pay others to think, lead, educate or raise our young, to make everything for us, much of which we should make ourselves, to sing for us, play for us, especially sports, entertain us, create things, even have sex for us. Well, you get what you work for, you get what you pay for, you get what you deserve. And look at what we got, and who we blame. We have changed all the definitions so that good is bad, bad is good, everyone else is wrong and to blame, and we are owed everything. Well, most of us have exactly what we worked so hard to get.
01-02-2009 19:24
JCE wrote:
I find myself so happy to agree with something, at least in part, that HHJ says. The fair tax isn't near enough, but it is a better step in the right direction. What runs the system is supply and demand. But too much governmental control, and the wrong control, sending the wrong price signals to the market is what is ruining it. That and greed wanting cheap cheap cheap energy and goods, handouts, and not looking at the long term, real cost of things. Government sending all the jobs overseas, making nothing in this country(not like it should be to remain world leader)and mainly, the energy policy. As long as the government keeps the price of oil too low, we will just keep spending money on oil, sending it to the Muslims, so they can fund the terrorists that our government created, so the terrorists can fight us, so we can fight them, going into debt, borrowing from China, then sending our money to China or OPEC, further beggaring our country. When we choose to have a better system of government, system of economy, system of voting to include registration, system of jobs, in this country, system of clean, cheap, sustainable American controlled energy, then the middle class and poor will make it happen, and the banks and rich will invest in it. We have what most of us want, and until we all want better, this is it.
01-02-2009 16:27
DARKCHOCALATE1946 wrote:
THE SAME THING
i DON'T UNDERSTAND WHY ANYONE WOULD STILL TOUT THE REPUBLICAN IDEAS. THEY ARE THE REASON WE ARE IN THE MESS WE ARE IN NOW. WE ARE LIVING THOSE IDEAS RIGHT NOW AND THEY HAVE NOT GOT US ANYWHERE. IT'S JUST LIKE A REPUB TO WANT TO KEEP[ DOING THE SAME THING.
01-02-2009 15:39
Orminon in North Carolina wrote:
Not a good choice
Lawrence Kudlow's statement "his aversion to successful earners and investors", referring to Barack Obama, is an example of the many absurd thoughts in his dim article.
Warren Buffet, a somewhat successful earner and investor, is a fine example of many uber rich
Americans who continually contradict your stereotypical droning. Buffet and others also happen to support Obama's approach toward economic solutions as well.
These admittedly fat cats take the risks and invest, but earn only when they get it just right. They also consistently give mightily to worthy causes that often don't make headlines.
Rich vs not rich is not the focal point. It's all relative anyway. You got your 7/11 desperado and your Bernard Madoff, your Mother Teresa and your Leona Helmsley. Fat or lean, bully or saint, we all have daily trials and problems that challenge our morals and resources.
The Americans in the middle of all this is where "the rubber meets the road". They are the ones who make it all work and THEY ARE IN TROUBLE NOW!!!!
Supply side tactics are appropriate at some points in time but not more now please.
Warren Buffet, a somewhat successful earner and investor, is a fine example of many uber rich
Americans who continually contradict your stereotypical droning. Buffet and others also happen to support Obama's approach toward economic solutions as well.
These admittedly fat cats take the risks and invest, but earn only when they get it just right. They also consistently give mightily to worthy causes that often don't make headlines.
Rich vs not rich is not the focal point. It's all relative anyway. You got your 7/11 desperado and your Bernard Madoff, your Mother Teresa and your Leona Helmsley. Fat or lean, bully or saint, we all have daily trials and problems that challenge our morals and resources.
The Americans in the middle of all this is where "the rubber meets the road". They are the ones who make it all work and THEY ARE IN TROUBLE NOW!!!!
Supply side tactics are appropriate at some points in time but not more now please.
01-02-2009 15:11
Alice wrote:
“…the sum-total of the 2003 tax cuts comes to somewhere between $25 billion and $40 billion. Compare that to a trillion-dollar spending plan.”
The reason the 2003 tax cuts was only $40 billion is that it applied to a tiny percentage of the population - the ones that are already rich. The trilllion-dollar plan helps all the rest of us.
99% of the country does not even know what “capital gains” even means. If you’re rich enough that capital gains tax is important to you, you already, by definition, have enough money that it shouldn’t be a big problem for you to pay it and you’re not going broke because of it. For all the rest of us, the ones who actually do the spending that businesses rely on, we need a stimulus that we can feel, that applies to us, that will help us shape the economy so it benefits us.
Alice
The reason the 2003 tax cuts was only $40 billion is that it applied to a tiny percentage of the population - the ones that are already rich. The trilllion-dollar plan helps all the rest of us.
99% of the country does not even know what “capital gains” even means. If you’re rich enough that capital gains tax is important to you, you already, by definition, have enough money that it shouldn’t be a big problem for you to pay it and you’re not going broke because of it. For all the rest of us, the ones who actually do the spending that businesses rely on, we need a stimulus that we can feel, that applies to us, that will help us shape the economy so it benefits us.
Alice
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