With a record 24 million people watching the GOP debate, you’d think there would have been a lot more time spent on the most important issue of the day: the economy. Look at any poll. Jobs and the economy are always at the top of the list. But there was barely a mention of this on Thursday night.
The Republican party is not going to win this election unless it persuades the electorate that its primary principles of low marginal tax rates, lighter regulation, free trade, and a sound dollar are the best path to growth. Call it free-market capitalism. Call it supply-side. Call it entrepreneurship. Call it take-home pay. But the endgame is growth and prosperity.
So let’s make this very simple. Like almost every election in American history, 2016 is going to be about growth versus redistribution, private-sector markets and competition versus government planning, and a hard reliable dollar versus a protectionist collapse of the greenback.
Back in 2012, the GOP never made the optimistic growth case. As fine a man as he is, Mitt Romney played the pessimist, telling us daily what’s wrong with America and its economy. And Barack Obama was the optimist, telling us that things weren’t great but they were improving.
Voters chose the optimist. They always do. Bill Clinton. Ronald Reagan. John F. Kennedy. FDR.
Yet as small as the economic segment was in the Cleveland debate, I think three people came out on top of it: John Kasich, Marco Rubio, and Jeb Bush. And one individual went wrong direction: Donald Trump.
Kasich offered few specifics. But he absolutely launched on effective riffs for growth and optimism.
“Economic growth is the key,” said Kasich. “Economic growth is the key to everything. And we must reach out to people in the shadows. America is a miracle country, and we have to restore the sense that the miracle will apply to you.”
Kasich argued for “growth, growth, growth,” with lower tax rates and a balanced budget. He basically adopted the JFK-Reagan-Jack Kemp mantra that a rising tide lifts all boats.
Jeb Bush was more programmatic. He stuck to his 4 percent growth target and emphasized that 2 percent secular stagnation is not acceptable. He wants lower tax rates, fewer regulations, unleashed energy, school choice, and Obamacare repeal. And he asserted at least twice that effective immigration reform is an economic-growth driver.
Marco Rubio also argued for Obamacare repeal and school choice, and mentioned limited regulatory budgeting and overturning Dodd-Frank. Interestingly, he was specific on taxes. He argued for a 25 percent corporate tax rate for small and big businesses. This looks like a positive change. Previously he had a 35 percent top personal tax rate, which would be the small-business pass-through rate. If he’s lowering that to 25 percent, a good thing, it may mean he’s cutting way back on his $1.6 trillion child-tax-credit proposal, which has been panned by supply-siders as anathema to true tax reform without any growth impact. We’ll see if that reading is correct.
Governor Chris Christie also wants to lower tax rates, but his Social Security plan would reduce benefits and turn the system into a means-tested entitlement. Respectfully, I don’t buy it. Anyway, if the economy grew at 3.5 percent over the long run — the American tradition — Social Security would be in fine shape.
Meanwhile, Ben Carson seemed to promote a 10 percent flat tax, but offered no details, and Mike Huckabee stuck with his fair tax, which is well intentioned but unworkable. Rand Paul’s promising flat tax never came up.
And no one talked about the dollar and monetary policy, which are incredibly important. A collapsing dollar value such as occurred in the 1970s and 2000s will doom the economy. But a reliably hard dollar not only keeps inflation low, it gives America a leg up in the global race for capital.
And then there’s Donald Trump. As I wrote a week ago, his 2011 book highlighted supply-side policies such as slashing personal tax rates and abolishing the corporate tax. There was no mention of these in the debate. Instead, Trump continued to rail against China and Mexico and generally the rest of the world.
This has protectionism written all over it. Mexico is our second-leading export market. China is our second-biggest trading partner. A 35 percent tariff, which Trump has hinted at in the past, would be a gigantic tax hike, setting off a global trade war and doing incalculable damage to our economy. We don’t need another Smoot-Hawley. Trump should have been asked about this by the debate moderators. Unfortunately, the subject of trade never came up.
Economic growth and optimism are the keys to victory. But until Republicans spell out specifics on taxes, trade, and money, they won’t close the deal.
