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theodore M I R A L D I mpa ... editor, publisher, writer
Sunday, February 28, 2016
Why So Silent on the Economy?
Campaigning in New York, March 1980 (Credit: Newscom)
When Ronald Reagan ran for the Republican presidential nomination in 1980, the top issue was the sour economy. Reagan’s solution was a 30 percent, across-the-board cut in individual income tax rates. As nominee, he stuck with the big tax-cut as his main message. And he followed through as president, signing a 25 percent reduction into law in 1981.
Reagan is a model of what today's Republican candidates should be doing—but aren't coming close to. Queasy aides wanted Reagan to soft-pedal his tax cuts. He refused. His opponents attacked his tax plan, saying it would cause inflation to soar. He continued to talk about taxes and the economy, which was what voters wanted to hear about.
Voters in 2016 are no different. They care about the economy far more than other issues. In an exit poll at the South Carolina primary, 97 percent of voters said they are "very worried" or "somewhat worried" about the economy. Yet Republicans barely broach the subject.
It's not that they don't have serious tax reform plans. Marco Rubio would expand the child tax credit and kill the capital gains tax. Ted Cruz would install a 10 percent flat tax along with a 16 percent business tax. Ben Carson would fix a "uniform" 14.9 percent tax rate "with no deductions, no loopholes and no shelters."
Every Republican candidate has a built-in economic message. Why don't they unleash it? "There are two possibilities," says Jeff Bell, who advised Reagan in his 1976 and 1980 campaigns. "Either their plans will not turn the economy around, or they will turn the economy around but aren't popular with voters."
Whatever the reason, they've surrendered the issue to Donald Trump. In the New Hampshire exit poll, 41 percent said Trump would "best handle the economy." In South Carolina, 45 percent said Trump would. No other candidate was close.
Trump doesn't offer the kind of free-market solutions that ignited eras of growth and prosperity in the 1920s, the 1960s, and the 1980s and 1990s. He opposes the Trans-Pacific Partnership trade agreement and free trade in general. He's for curbing immigration and deporting 11 million illegal immigrants from the United States. He's against reform of entitlements. There's plenty here to go after.
The fact that he's a famous businessman gives him credibility on the economic issue. He includes the economy in his promise to "make America great again." And he has a tax reform plan that would trim the top income tax rate to 25 percent.
But Trump rarely talks about economic growth. He doesn't have to. He's already king of the economic hill. It's his rivals who need to, especially by challenging him on trade, immigration, and government spending. When he declared he would get rid of "waste, fraud, and abuse"—code words for lacking a clue about where and how to cut spending—his Republican foes were silent.
The saddest case was Jeb Bush. His proposal for tax reform was impressive and credible. He should have made it the centerpiece of his campaign rather than harping on his record as governor of Florida. And now he's out of the race.
There are plenty of good ideas for Republicans to stress. Cutting the corporate tax rate from 35 to 30 percent as a means of creating jobs and higher incomes for middle-class Americans is one. Studies have shown wages go up when corporate taxes go down, says Kevin Hassett, the director of economic policy studies at the American Enterprise Institute.
Attacks by Democrats could be easily thwarted. The tax cut could be enacted for five years. If jobs and wages rose, another 5 percent could be cut. If the economic effects were disappointing, no problem. The tax cuts would expire in five years.
History is on the side of cutting corporate taxes. When the U.S. rate was hiked to 35 percent in 1994, the average rate in countries with advanced economies was 40 percent. But rates abroad now average 23 percent, which has put the American economy at a disadvantage.
In Nevada last week, Reagan lived again. To herald Cruz's support for a gold standard, an ad by a pro-Cruz PAC, the Lone Star Committee, used a clip from a 1980 Reagan spot. Reagan appeared first, saying "some form of gold backing to the dollar" would stop inflation and restore price stability. Then Cruz appeared, in a clip from a debate, arguing for "sound money and monetary stability ideally tied to gold."
The ad was produced by Elliott Curson, the same media consultant who created the original Reagan ad 36 years ago. The new ad ended with these words: "Finish the Reagan Revolution." Not a bad idea.