Econ­o­mists: Growth from tax cuts, re­forms

The Washington Times Weekly - - National - BY ANJALI SHASTRY

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.

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