- The Washington Times - Saturday, June 10, 2006

Conservatives can no longer afford to support President Bush’s fiscal policies, which have led to a below-par recovery that is poised to slip into an even slower growth path, a prominent Republican supply-side economist said.

In another sign of the growing political erosion among Mr. Bush’s once-solid conservative base, veteran tax-cut crusader Larry Hunter has broken with his longtime supply-side allies — charging that Mr. Bush’s “economic recovery ain’t all it’s cracked up to be” and that conservatives can no longer “ignore the spending cancer growing at the core of the Bush domestic-policy legacy, which will lead to tax increases unless it is stanched soon.”

“In my opinion, conservatives simply no longer can afford to give our support to a political party whose only campaign slogan is ‘Vote Republican; we aren’t as bad as the Democrats,’” Mr. Hunter wrote in a letter to fellow conservatives that accompanied a paper released yesterday attacking Mr. Bush’s economic and spending policies.

Mr. Hunter’s criticism is especially significant because he supported the Bush tax-rate cuts as far they went, though he called for deeper reductions to fuel stronger economic growth. As a former chief economist at the U.S. Chamber of Commerce who became a senior adviser and economic strategist on Jack Kemp’s economic brain trust, Mr. Hunter has been one of the prominent supply-side champions in the Republicans’ tax-cut battles over the past several decades.

In his paper, “Lost Output; Lost Opportunities: Has the Economy Fallen Onto a Lower Growth Path?” Mr. Hunter wrote that “by historic standards, the current recovery really hasn’t been up to snuff, and I don’t see much prospect for recouping lost ground without major reforms” in spending and tax reductions.

Too much of the initial Bush tax cuts “consisted of tax credits and rebates that increased the deficit, but did not reduce the marginal tax rate on work, saving and investment. Thus, they did little to boost economic growth,” he wrote.

“Consequently, the early stages of the economic recovery were subpar when measured against previous recoveries,” he wrote. “As a result, the economy has not yet returned to the growth path it was on before the recession and, in order to do so this late in the day, it will have to grow even faster in the coming years.”

The Bush administration and private economists “do not foresee an acceleration in growth occurring,” he wrote.

If Mr. Bush’s tax cuts are not extended and expanded beyond their scheduled 2010 expiration date, and future spending is not curtailed, “the economy may actually fall onto a lower growth path,” Mr. Hunter warned.

The administration has forecast growth next year in the 3.6 percent range, about where it has been running, and a consensus of blue-chip corporate economists reported last week that growth could fall below 3 percent.

In his letter, Mr. Hunter called on conservatives to withhold their support for the Republican Party’s policies to force needed reforms.

“I believe it’s time we rejected the GOP establishment’s extortion and fear tactics and laid down a marker of our own to establish the price of our support in the upcoming election. This country isn’t their private plantation,” he said.

Mr. Hunter’s criticism was rejected by several of his conservative allies, who expressed surprise at the intensity of his attacks on the tax cuts which, they maintained, had led to a strong recovery and a sustained economic growth rate that was running at 5.3 percent in the first quarter.

“This is not a subpar economy; it’s a fantastic economy,” said Art Laffer, the California economic guru who is widely considered the intellectual leader of President Reagan’s supply-side tax-cut revolution.

In a recent paper on the state of the nation’s economy, Mr. Laffer credited Mr. Bush for cutting the top income-tax rate of 39.6 percent under President Clinton to 35 percent and added that the 15 percent tax rates on capital gains and dividends under Mr. Bush were “the lowest in my lifetime.”

“Larry seems to have forgotten that it was the president who has been pushing through the Congress major supply-side tax reduction, cutting the marginal rates, and he seems to be belittling that accomplishment,” said Cesar Conda, who was Vice President Dick Cheney’s domestic adviser.

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