The Fight Over 5% Growth

http://www.futureofcapitalism.com/2011/06/the-fight-over-5-growth

There's some lively internecine warfare breaking out on the right side of the political spectrum over Governor Pawlenty's announcement of a 5% growth goal. Here's Kevin Williamson, a deputy managing editor of National Review, writing at National Review Online:

The deeper problem with the rosy growth scenario as advanced by Tim Pawlenty and articulated by Larry Kudlow is that it is treated as a self-fulfilling prophesy: None of them has made a rigorous case that we can in the immediate future expect real growth rates significantly in excess of our historical experience. No credible forecast predicts such growth. What they have said instead is that by adopting a high-growth target we are more likely to achieve higher levels of growth. But many of the polices they seek to advance — notably, tax cuts in the face of continuing unprecedented deficits — are potential fiscal catastrophes unless we build into our accounting the very unlikely growth assumptions that the policies are intended to produce: We can cut taxes without aggravating the deficit if we have 5 percent growth. How do we get to 5 percent? Cut taxes. (This is, at heart, only a variation on the tax-cuts-pay-for-themselves canard.) The argument is, in the end, circular: The policies intended to produce historically atypical levels of growth make sense only if we assume that atypical growth in the first place. If that sounds to your ear a lot like "Clap loud enough and Tinkerbell will come back to life," then we are on the same frequency.

Mr. Williamson's post doesn't reckon with John B. Taylor, a seriously credentialed economist (professor of economics at Stanford, former under secretary of Treasury, former member of the president's Council of Economic Advisers, ), who writes that the 5% growth goal "makes a great deal of sense."

This is a fight that I hope plays out in the 2012 (and 2016) Republican presidential primaries and that I hope is won by the pro-growth tax-cutters rather than by the deficit hawks, but no matter who wins, it's a newsworthy fight with a lot of historical resonance.

by Ira Stoll  |  Jun 22, 2011 at 10:13 pm Related Topics:  Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list