Faced with projections of a sluggish economy, three conservative economists said Thursday that a massive package of tax cuts and regulatory reforms could spur growth of greater than 4 percent a year.
They called for erasing the tax hikes on the wealthy that have occurred on President Obama’s watch, cutting corporate tax rates and freeing American energy production as the keys to fostering a spike, which they said is the best way to escape looming fiscal challenges.
“Growth is the issue of our times,” said Stephen Moore, a senior economic contributor for D.C. economic think-tank FreedomWorks.
The recommendations come as the economic picture looks gloomy. The post-recession rebound, already years overdue, won’t fully kick into gear until next year, and will be relatively small and short-lived, the Congressional Budget Office said in August. Growth will top out at about 3 percent in 2016 and 2017 before dropping down to an average of about 2 percent of gross domestic product annually, the CBO said.
Such limited growth is unacceptable, the economists said.
They called for a Reaganesque package: Cutting corporate taxes and taking away “punitive” tax hikes for the country’s wealthiest citizens would add 1 percent of growth, ending the crude oil export ban and limitations on fracking and coal production would add another 1.5 to 2 percent growth, and introducing higher interest rates for borrowers and lenders could add between 1 and 2 percent of growth.
The growth could be anywhere between 4 and 5 percent a year when it is all added together, said Mr. Moore, who writes a column for The Washington Times Commentary section.
But Jared Bernstein, a former economic adviser to the Obama White House, said the conservatives’ list of policies was a rehash of tired ideas.
“Let’s not spend a bunch of time talking about unicorns here,” Mr. Bernstein said. “I think the vast majority of economists have been uniformly critical of this notion by George Bush that was seen, and raised by [presidential candidate Mike] Huckabee, that you could get growth rates to 4 percent, or north of 4 percent, by tweaking policies.”
Mr. Bernstein, who is now an economist at the Center on Budget and Policy Priorities, said the only time the U.S. has seen such rapid economic growth was between 1994 and 2000, a time when President Clinton, a Democrat, held the White House and rejected supply-side economics and massive government cuts.
“These are typically policymakers or they are advocates who want to deregulate and cut taxes, do away with the EPA and just go down the list of policy options that you hear in any given Republican debate,” he said. “They’re trying to say, ‘well if we do everything we want, we’re going to double the growth rate,’ and that’s just not plausible.”
But these policies can and will work, Scott Hodge, the president of Tax Foundation, said, as long as it was more important to the policymakers to promote economic growth than think about “Uncle Sam’s coffers.”
“Other countries are tickled that we’re caught in a political stalemate,” Mr. Hodge said. He cited the United Kingdom, which plans to lower corporate tax rates from 20 percent to 18 percent, and said the U.S. has the third highest corporate tax rate in the world.
“Policies matter a lot,” David Malpass, president of Encima Global and former Republican staff director of the Joint Economic Committee of Congress, said. He said the Obama administration had settled into resignation over this sluggish growth, and were not aiming higher.
The market interest rates have been close to 0 percent for seven years, Mr. Malpass said. This is good for Wall Street and the government, who borrow money and have low interest rates, but is not good for lenders who are not making money off of their investment, he said.