Presidential candidate Tim Pawlenty unveiled an ambitious series of tax cuts on Tuesday that harkens back to the economic policies proposed by Ronald Reagan during his 1980 presidential campaign.
But in fact, Pawlenty’s proposal goes a step beyond “Reaganomics” in some ways. It slashes the corporate tax rate more than Reagan did, reduces defense spending rather than raising it to record levels like Reagan did, raises the Social Security retirement age, and places control of services like the Post Office out of the government’s control.
Pawlenty is tagging his presidential campaign to a very aggressive economic strategy and promising a lot — both a lot of change and a lot of results.
He’s also setting the tone for a 2012 Republican field that, apart from Pawlenty, has yet to establish its economic plans. And if Pawlenty’s proposal is any indication of where the other GOP candidates stand, there should be a very clear contrast on the direction of the economy in with President Obama.
But whether GOP candidates jump on Pawlenty’s bandwagon is an open question, particularly as balancing the budget is so en vogue in the GOP.
Pawlenty’s goal is five percent annual growth for the economy, which would be just a tick higher than it was under Reagan and also slightly higher than it was under President Clinton in the 1990s. Beating those times of economic boom is a tall order, to say the least.
Now, in fairness, Pawlenty isn’t promising 5 percent growth — he’s merely setting it as a goal — but the former governor does sound like he thinks it’s altogether possible.
“Five percent growth is not some pie-in-the-sky number,” he said. “We’ve done it before. And with the right policies, we can do it again.”
Pawlenty’s goal has already earned him plenty of incredulous reactions from liberals and Democrats who suggest his plan would bust the deficit by massively cutting the government’s revenue stream.
Reagan got a similar reaction in the 1980 campaign, when even his Republican opponent, George H.W. Bush, called his plan “voodoo economics.”
Reaganomics is much closer to mainstream Republican economic thought today, but even considering how the party has changed over the last three decades, Pawlenty’s plan is ambitious.
Pawlenty is proposing cutting the corporate tax rate by more than half, cutting individual income tax rates by more than a quarter and eliminating the capitals gains, interest income, dividends and estate taxes.
It’s the first major economic address by a presidential candidate and it sets a high bar for the other Republican candidates to reach for.
The danger for Pawlenty is if his plan is seen as too ambitious even among Republicans. The GOP successfully pushed to extend the tax cuts passed under George W. Bush in the lame-duck congressional session last year, but we haven’t seen much in the way of proposing broad new tax cuts even from the tea party.
Keep an eye on whether the other candidates propose such drastic changes — specifically when it comes to the tax cuts. In an era where “truth-telling” is increasingly popular (Pawlenty has made a claim on it himself), does a deficit-minded Republican opponent of Pawlenty scoff at the idea of such broad and deep tax cuts?
Tax cuts are popular in the GOP, but Pawlenty is still gambling here.