By Larry Kudlow
Friday, August 24, 2012
In the two weeks since Mitt Romney chose Paul Ryan as his
running mate, the entire Republican party has been rejuvenated. Governor Romney
himself has been reenergized. After losing ground in the polls this summer,
he’s once again drawn even with the president. Wisconsin is now in play. Even
senior voters in Florida have signaled heavy approval of Romney-Ryan.
I know vice presidents are not supposed to be so
influential. Political scientists say the top of the ticket is what matters.
But Paul Ryan is disproving that.
And yet I hear and read some grousing from conservative
supply-side colleagues that Ryan is no longer the Jack Kemp, supply-side-growth
guy he once was. Instead, they say he has become a root-canal Republican who
obsesses about entitlement debt bombs and deficit reduction. They say he’s
wedded to the Congressional Budget Office in a kind of budget-austerity,
Stockholm syndrome.
The whisperers say this happened to Dave Stockman years
ago at OMB. Now they say it’s happening to Paul Ryan at the head of the House
Budget Committee.
These charges are completely false.
On the eve of the convention, I had a lengthy interview
with Congressman Ryan. Over and over he talked about the need for economic
growth through supply-side tax reform, spending restraint, deregulation, and
entitlement fixes.
Previewing his convention speech, Ryan said, “We have to
show the country that we have a pro-growth plan to get people back to work, to
get this economy growing again.” He said, “We want to get back to the American
idea [of an] opportunity society with a safety net; [a] society of growth,
opportunity, of upward mobility.”
This is Reagan. This is Kemp. This is growth, not root
canal.
The congressman said Team Romney, with a 20 percent across-the-board
tax cut, is aiming at an average growth rate of 4 percent over the next four
years. “If we can do that,” he said, “which we think we can with the right
economic-pro-growth policies, we can get 12 million people back to work.”
Ryan opposes crony capitalism and corporate welfare. He
wants Washington out of the game of picking winners and losers. He argues that
if Obama raises the top tax rate on small businesses to over 40 percent, it
would kill growth and jobs. He argues in supply-side fashion that lowering tax
rates and plugging loopholes will produce more income, not less.
At one point in the interview, Ryan summarized the
Romney-Ryan position: “Pro-growth policies, energy policy, regulatory reform,
tax reform, and spending cuts.” As I have said before, I believe the Mitt
Romney platform is the most conservative Republican policy since the Reagan
era. Paul Ryan bolsters it.
Ryan also said this: “Let’s get the size of government
back down to where it has historically been: 20 percent of GDP by 2016.” In
other words, significant spending restraint. This is pro-growth, too.
Supply-side mentor Art Laffer has been arguing for years
that lower spending as a share of GDP is essentially a tax cut to grow the
economy. In fact, with a 20 percent reduction in marginal tax rates, and
significant spending restraints, it’s the most powerful economic-recovery tonic
possible. And let’s add to that: The Romney-Ryan plan will slash the corporate
tax rate from 35 to 25 percent -- a monumental growth measure.
Depending on how fast the spending comes down, I
calculate that Romney could lower the spending baseline by as much $1 trillion
in his first term. This, along with economic-growth incentives and
upper-bracket loophole-closers, will pay for supply-side tax cuts without
raising taxes on the middle class. In fact, this tax reform will drop
middle-class tax rates near 12 to 20 percent -- a significant reduction from
current law.
This comprehensive view of growth incentives and deep
spending cuts completely counters the false liberal argument that somehow
middle-class taxes have to go up. With a comprehensive growth plan,
middle-class taxes go down.
Ryan expressed dismay at the latest CBO recession
forecast concerning a possible rollback of the Bush-era tax cuts. But he said
the first order of business for the Romney administration will be to fix the
tax cliff and avoid another recession, which would be devastating to America’s
psyche.
Finally, Ryan summarized his monetary strategy in two
words: sound money. He said, “We want to pursue a sound-money strategy so that
we can get back the King Dollar, as you say it, Larry.” Indeed, the Republican
platform committee, hopefully with Romney’s backing, is including a
gold-commission study that would put much-needed discipline into Fed
policy.
So let me say this to my skeptical supply-side friends: I
don’t see one whiff of evidence that Paul Ryan has departed the pro-growth
model. Flatter-tax reform, spending restraint, deregulation, bolstering
entitlements -- this is all from an updated Reagan-Kemp playbook.
And it’s a playbook that’s going to win another big
election.
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