On paper, Tim Pawlenty's "Better Deal" is supposed to be an answer to Barack Obama's economic policies, and a showcase of Pawlenty's public policy bona fides. In reality, Pawlenty's Better Deal is only a short step away from economic nonsense. Here is Pawlenty's plan, as presented this afternoon in a speech at the University of Chicago:Let’s start with a big, positive goal. Let’s grow the economy by 5 percent, instead of an anemic 2 percent. [...]
It’s been done before: Between 1983 and 1987, the Reagan recovery grew at 4.9 percent annually. Between 1996 and 1999, under President Bill Clinton and a Republican Congress, the economy grew at around 4.7 percent annually.
Given that numbers have meaning independent of Tim Pawlenty's, it's worth pointing out that 4.9 and 4.7 aren't actually 5 percent. Yes, they're close to 5 percent, but by definition, they are not 5 percent. Still, a 5 percent growth rate would be fantastic for the economy, but it is ambitious. What does Pawlenty propose to get us there? Massive investment into science, education, and infrastructure? A renewed commitment to research and alternative energy?
Nope, none of the above. To create three points of GDP growth, Pawlenty offers two "solutions": cuts to taxes and cuts to spending. Taking a page from Paul Ryan and the House Republican budget, Pawlenty proposes massive tax cuts on corporations (reducing the rate from 35 percent to 15 percent) and high-income earners, reducing the top rate to 25 percent for those who make more than $100,000. His plan also eliminates taxes on capital gains, dividends, and estates. As National Journal's Tim Fernholz point's out, this represents a "dramatic reduction in overall revenue."
As for spending cuts, Pawlenty proposes a cap that limits federal spending to 18 percent of GDP. To give you a sense of how draconian this is, the Balanced Budget Amendment proposed by the Republican Study Committee also promises to hold spending to 18 percent of GDP. According to the Center on Budget and Policy Priorities, this requires massive cuts to non-defense discretionary programs, to the tune of 70 percent in 2021. Programs for the poor and disadvantaged -- Medicaid and the Supplemental Nutrition Assistance Program, for instance -- would be cut by half, and entitlements would be slashed, with a Paul Ryan-esque voucher program for Medicare, and a five-year bump in the eligibility age (to 70) for Social Security. Compared to Pawlenty's plan, Pat Toomey's plan is moderate, and Simpson-Bowles is communism.
