Pawlenty on Finding Government Programs to Cut: Google Them
Harnessing Reaganomics to the Internet revolution, former Minnesota Gov. Tim Pawlenty laid out his economic vision for the nation—and his potential presidency—on Tuesday at the University of Chicago, a bastion of conservative economic academia.
Pawlenty outlined an approach to fiscal issues that closely tracks the fiscal austerity program of House Budget Chairman Paul Ryan, R-Wis., but his ambitious program of tax cuts exceeds almost every other proposal under consideration. Combined with a business-friendly regulatory policy, Pawlenty says his plan is the path to growth levels not seen since the early ’80s.
Although Pawlenty includes predictable campaign criticisms of President Obama’s “class warfare” and highlights the failure, so far, of the president’s economic policies to bring about a substantial recovery, the speech largely focused on making the case that Pawlenty can stand toe-to-toe with Obama—and near-term rivals like former Massachusetts Gov. Mitt Romney—on economic issues that dominate voters’ minds.
Offering a “Better Deal,” a construction in the economic messaging tradition of Democrats beginning with Franklin Roosevelt’s New Deal, Pawlenty promised a target of 5 percent yearly economic growth, which hasn’t been seen in the United States since the economy expanded at a 7.2 percent clip in 1984. To his benefit and likely no accident, his prescription of how to equal that achievement is similar to the policies of then-President Reagan.
Pawlenty offered a breathtaking series of tax cuts, beginning with a reduction in the corporate tax rate to 15 percent, and an income tax policy that closely mirrors Ryan’s fiscal 2012 budget framework, offering only two rates, 10 percent and 25 percent, for households that make up to and more than $100,000, with a generous minimum exemption for cuts of nearly one-third to individual tax bills. The plan also eliminates taxes on capital gains, dividends, and estates, representing a dramatic reduction in overall revenue.
A Tax Policy Center analysis of Ryan’s plan said it collects only about 16 percent of gross domestic product in revenue each year, and Pawlenty’s variant would attract even less. With government spending standing at about 25 percent of GDP this year and averaging about 20 percent, the balanced budgets Pawlenty promises imply massive spending cuts.
In this area, as GOP primary politics demand, Pawlenty isn’t shy. He endorsed constitutional spending caps that would limit government outlays to 18 percent of GDP. He touts his record in Minnesota, saying he “cut spending in real terms for the first time in our state’s history” and set himself up as a conservative reformer in the style of Wisconsin’s Scott Walker, who attracted controversy and conservative support in a months-long battle with public unions, or New Jersey’s combative Chris Christie.
“We did it by setting a record for vetoes,” Pawlenty said. “It took a government shutdown and a long government union strike, but we got it done.”
He also hit a Tea Party sweet spot with criticisms of the Federal Reserve’s monetary policy, warning of inflation (despite continuing low inflation expectations from the markets) and urging that the central bank no longer concern itself with unemployment.
Pawlenty did move beyond standard GOP rhetoric, articulating the case for spending cuts and privatization by invoking the Internet economy, applying “the Google test.... If you can find a good or service on the Internet, then the federal government probably doesn't need to be doing it.” Palwenty cited the U.S. Postal Service, the Government Printing Office, Amtrak, and mortgage giants Fannie Mae and Freddie Mac as outmoded candidates for privatization.
While shifting public services to the private sector is a winner among conservatives, many influential interest groups, including the National Association of Realtors, oppose radical changes to Fannie and Freddie that could disrupt the already fragile housing markets.
To ease the way for spending cuts, Pawlenty will propose giving the White House new authority to freeze spending and impound up to 5 percent of federal spending until the budget is balanced, arguing that cutting 1 percent of overall federal spending for six consecutive years would balance the budget by 2017.
That proposal may be difficult to pass in Congress. Obama requested the authority to merely challenge congressional spending bills to force votes on specific spending, but though it has the support of budget hawks, including Ryan, it was defeated. A shift in power to the executive will infuriate congressional appropriators and could alienate libertarians in the Republican primary.
And in words to warm the hearts of business interests, Pawlenty laid into federal regulations as costly hidden taxes, criticizing Obama's health care plan and financial reform effort in vague terms. He endorsed requiring all federal regulations to sunset with extensions by Congress, which would have the benefit of allowing for the lapse of outdated rules but could paralyze Congress.
“Our people are ready to get back to work,” Pawlenty said, summing up his argument. “We just need to give them to tools to get there, and get the government out of the way.”
This article appears in the June 7, 2011 edition of National Journal Daily PM Update.