Editorial: Serious candidate, questionable plan

  • Updated: June 8, 2011 - 8:35 PM

Pawlenty doubles down on policies that didn't work here.

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“No more 'too big to fail’,” presidential candidate Tim Pawlenty told supporters recently.

Photo: Glen Stubbe, Star Tribune

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Former Minnesota Gov. Tim Pawlenty broke away from the pack of 2012 Republican presidential contenders on Tuesday with a bold economic speech that grabbed national headlines and scored political points with wealthy business interests whose donations will be the lifeblood of his fledgling campaign.

The Chicago speech should end lingering GOP doubts about Pawlenty's conservative credentials, which have been questioned because of his previous interest in matters of climate change. Pawlenty didn't just serve up the usual Republican solutions -- tax cuts, smaller government, less regulation -- he injected these unproven ideas with steroids.

Pawlenty calls for sweeping tax cuts dubbed by some as "breathtaking." He'd cut the corporate income tax from 35 percent to 15 percent, and eliminate taxes on capital gains, interest income, dividends and inheritances. There would be two tiers of personal income taxes -- 10 percent and 25 percent.

Pawlenty would require Congress to reauthorize all federal regulations and radically reshape the federal government by privatizing services such as the U.S. Postal Service and Amtrak. He also would support an ill-advised balanced budget amendment. You could almost hear the corporate special interests uttering "check, check and check!" as the South St. Paul truck driver's son ticked off items on their wish lists and then one-upped them.

Pawlenty has offered up an easy-to-grasp economic policy, one that distinguishes him in a GOP field dominated by Tea Party ideals and religious fundamentalism. The speech also helped neutralize businessman competitor Mitt Romney.

Smart politics, yes. But are these smart policies for the nation? The answer, to be charitable, is mixed.

There's certainly merit to some Pawlenty ideas. The corporate income tax does put America at a competitive disadvantage, though lowering it means finding revenue elsewhere. Pawlenty also bravely suggested raising the Social Security retirement age, though he didn't specify what it should be. He played it safe on defense spending, saying only that he would "slow the rate of growth."

But Pawlenty didn't even try to support his central argument -- that tax cuts and smaller government would spur astounding economic growth of 5 percent annually over 10 years -- with evidence. That's because neither economic research nor reality confirms his promise. In fact, data suggest that cutting taxes and government at the same time reduces growth.

Pawlenty's economic policies have been test-driven in the real world -- in Minnesota -- and the state is now paying the price. Under his legislative leadership, the state permanently cut income taxes in 1999 and 2000, which benefited high-income earners the most and cut state income tax revenue capacity by about 10 percent.

Spending never decreased to make up for this. Instead, the state made a further spending commitment in 2001 to take more responsibility for education funding -- a move that offered local property tax relief.

The effect of all of this was an ongoing structural deficit that combined with an economic downturn to culminate in the $5 billion deficit crushing Minnesota today. The supposed revenue from tax-cut-induced growth -- which was magically going to make up for lower income taxes-- never materialized.

And if it didn't happen here -- in a state that started down this road in an era of surpluses -- why would it happen at the federal level? It's frightening to think that the federal deficit is already measured in the trillions.

At its core, Pawlenty's plan is a gamble that these revenues would somehow appear and that he'd be able to cap spending at a level not seen since the Reagan years and before, when there were fewer elderly, less debt (and its associated costs) and lower health care spending.

This bet backfired in Minnesota. Pawlenty has yet to explain why it would pay off if he were president.

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  • A WEBSITE WEIGHS IN

    "Pawlenty was asked to justify why more tax cuts for high income earners can produce jobs. His answer was vague and evasive. His lack of a real response reconfirms everyone's worst fears, that the most prominent GOP candidates don't have a credible jobs plan."

    NOAH KRISTULA-GREEN of FrumForum, a well-known conservative website founded by Republican David Frum.

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