Have you noticed that when George W. Bush talks about investing in America’s economic future by cutting taxes, his polls go up and even the stock market seems to show more confidence? And when he moves to other issues, the race seems to get tighter?
Of course Mr. Bush has been promoting his across-the-board tax cut plan all year, but he has not effectively made the connection between lower tax rates and higher economic growth until recently. He did not, as Wall Street economist Larry Kudlow points out, “connect the dots.”
It has only been in the last few weeks that the Republican presidential nominee has been making the critical connection that America’s workers instinctively understand. Just as they did when Ronald Reagan made the very same arguments at the beginning of the 1980s.
The life blood of a vibrant and vigorous economy is capital, Mr. Bush thinks. And he believes that tax cuts are needed to fuel stronger economic growth and new business expansion to produce the tax resources needed to finance Social Security and Medicare reforms and other necessary programs.
Al Gore on the other hand has been playing the fear card on just about every issue: fear of letting workers invest some of their payroll taxes in stocks and bonds to get a higher return on their retirement savings. Fear of giving Americans a menu of health care and prescription drug coverage choices just as federal workers now enjoy. And fear that the surplus will not be there in the years to come if we give some of it back to the people who earned it.
But Mr. Bush has begun to talk much more effectively about the critical importance of tax cuts to keep the economic expansion going, connecting the dots between lower tax rates and an accelerating economy.
Listen to what he told Wall Street analyst Ron Insana last week when he appeared on CNBC where Mr. Insana asked him what would happen if revenue surpluses fell?
“As I understand it, [the Congressional Budget Office] is projecting a growth rate of 2.7 percent. Alan Greenspan thinks it will be 4 percent. If that is the case, there will be $2 trillion extra dollars. What’s needed is somebody to set parameters. What we need is a leader who says that the taxpayers need some of the money back. The surplus is going to be there when I am there, but one reason why the surplus might not be there is because the economy slows down, and that is all the more reason to give people their money back. That is why I’m for tax relief. I think it is an important rule for economic growth.”
What Mr. Bush was saying for the first time is that he believes the economy can continue to grow at a bullish 4 percent growth rate and that this rate will bring in much larger surpluses than CBO is forecasting.
How much more? Budget forecasters tell us that we can expect a nearly $7 trillion surplus over the next 10 years at a 4 percent rate far higher than the $4.5 trillion that CBO currently projects.
Mr. Bush needs to keep making this argument between now and Election Day: That tax cuts are needed to nourish and replenish the U.S. economy with increased capital that risk-takers will invest in new start-up companies, new technologies, better-paying jobs and that workers and consumers will use to pursue the American dream.
It would be far better to have some of this surplus spent by workers and investors, recycling it through the economy, than to let Al Gore spend it on a thousand and one new federal programs. Under his plan, all of the general fund surplus would be spent by federal bureaucrats on more social welfare programs, more pork barrel spending and more regulatory, anti-trust law suits to pick the winners and losers in our economy.
The historic bull market that Americans have profited from over the last two decades began in 1982 when Ronald Reagan cut income tax rates across the board. “Reagan did the right thing,” Mr. Bush told Mr. Insana, not just because lower tax rates provided the economic incentives that fueled the productivity and ingenuity of American entrepreneurs and workers, “but because of the capital provided as a result of [that] tax cut.”
Mr. Bush is absolutely right. His embrace of Mr. Reagan’s growth economics that got us to where we are today and would lift our economy to an even higher level of growth is the key to future prosperity and to Republican success at the polls.
The Texas governor’s polling numbers began to climb earlier this month when he began attacking Mr. Gore’s plan to squander the non-Social Security surplus on $2.5 trillion in more federal spending. He shouldn’t let up.
The choice in this election is between those who trust the people to spend their hard-earned dollars more wisely for their families and those, like Mr. Gore, who believe that the government would spend your money better than you would.
If Mr. Bush continues to make this the central issue in this election, if he keeps making the connection between tax cuts and expanding the economic pie for everyone, this election could be 1980 all over again.