- The Washington Times - Sunday, August 8, 2004

House Speaker Dennis Hastert tends to operate behind the scenes. He is not one to make long public speeches or bask in the Washington glow. His image is more of a legislative tactician than a heavy thinker.

But it turns out Mr. Hastert has very clear opinions on domestic and economic policy, which he reveals in his just-released book, “Speaker.” In particular, there is an excellent pro-growth, free-market, pro-competition policy chapter on taxes, education, health care, energy and tort reform.

In every case, Speaker Hastert comes down on the side of the people and markets — not government. On medical care, he favors health-savings accounts. On education, he supports magnet, charter or private schools. On energy, he suggests full development of coal, oil, and gas reserves. On trial lawyers, he proposes legislative reform to limit class-action lawsuits, especially medical liability and asbestos suits.

If John Kerry takes the White House with Senate coattails in November, this worst-case scenario still leaves a Republican House. We can hope it will provide a bulwark against galloping statism and a growing government footprint on the economy.

Mr. Hastert reassures the House will do just that. He has some great conservative lieutenants in people like Reps. Tom DeLay of Texas and Chris Cox and David Dreier, both of California. And let’s not forget that the House Ways & Means chairman, Rep. Bill Thomas of California, snatched victory from the jaws of defeat in the 2003 tax-cut bill — legislation that miraculously delivered a 15 percent marginal tax rate for capital gains and dividends, along with accelerated implementation of lower marginal rates on personal income. That tax reform is what really launched the economy into full recovery. It may well save President Bush in November.

Speaking of taxes, Mr. Hastert has some very interesting pro-growth ideas.He correctly argues American jobs move overseas partly because of excess taxes and regulations on U.S. businesses. He also notes U.S. products are encumbered by corporate taxes and employment taxes, which add measurably to a product’s cost and price.

“Taxes account for between 23 to 27 percent of the cost of our goods and services,” he writes, “but when our products go overseas — to France, Germany, or Japan — our taxes stay embedded in our goods or services.” European countries, however, rebate their tax burdens to the employing companies, giving them a world market competitive advantage. “Our widgets have a tax burden,” he says. “Their widgets don’t.”

Mr. Hastert’s tax-reform paradigm looks like this: “For us to return capital and jobs to the United States, we’re going to have to change our present tax system and adopt a flat tax, a national sales tax, an ad valorem tax, or VAT. … It’s one of the most important things we can do over the next few years.”

Mr. Hastert adds homegrown U.S. labor costs are excessively high for three reasons: taxation, litigation and regulation. He also notes studies showing Americans spend nearly 6.1 billion hours on their taxes annually, and that two-thirds of taxpayers believe the system is far too complex. No one knows how big this waste is, but we are talking about a huge chunk of change.

Mr. Hastert doesn’t exactly come out for the abolishing the Internal Revenue Service, but he does think it would be a great idea down the road. The speaker cites Rep. John Linder, Georgia Republican, who proposes a national sales tax, and Michael Burgess, a Republican doctor from Texas, who offered a bill to replace the income tax with a flat tax over three years.

Either of these proposals would enhance productivity and grow the economy more rapidly, doubling national output over the next 15 years. “The answer is to grow the economy,” writes the Speaker, “and the key to doing that is making sure we have a tax system that attracts capital and builds incentives to keep it here instead of forcing it out to other nations.”

Looks like we have a powerful supply-side mole in the U.S. House of Representatives. The former high-school teacher has already surprised many with his strong management skills and legislative acumen. This man is interested in getting things done rather than hogging the klieg lights on television. A former wrestling coach, he is the quintessential team player. He reminds me of another son of Illinois — Ronald Reagan.

“Speaker” is a must read for all of us, but let’s hope President Bush has a chance to turn its pages before his crucial speech at the Republican National Convention and the last leg of the 2004 campaign trail. The plain-speaking Midwesterner has some solid ideas for the Texan’s second-term agenda.

Lawrence Kudlow is a nationally syndicated columnist and is chief executive officer of Kudlow & Co., LLC, and CNBC’s economics commentator.

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