Tim Pawlenty, the Governor of Minnesota when the bridge which carried Interstate 35 over the Mississippi River in Minneapolis collapsed during evening rush hour back in summer 2007, has carefully nurtured his reputation for parsimony with the public coffers. He isn’t given to gimmicky “investments” in government enterprises like, oh, say, maintaining and expanding basic infrastructure. Indeed, while the bridge that carries Interstate 35W over the Mississippi River was deemed structurally-deficient back in 2005, the Governor didn’t budget for regular inspections. Pawlenty is also one of the people we particularly have to thank for the fact that we’re presently in the several weeks’ space between the Federal Government’s exceeding the Federal debt limit and its inability to issue outlays to pay its current bills: In an op-ed in the Washington Post, then-Governor Pawlenty insisted that Congressional Republicans didn’t have to increase the Federal debt limit immediately and should instead essentially hold it hostage to compel President Obama to accept drastically-reduced levels of Federal spending–especially through hasty reductions in entitlement spending.
Now he is running for President, and he wants to cut the size of the Federal Government…a lot. In a speech last Tuesday, June 7th at the University of Chicago (a university famed for the laissez-fairest “Chicago School” economic philosophy), Pawlenty called President Obama’s policies “third-rate” and called for $2 trillion dollars in further tax cuts and $4 trillion-$6 trillion in Federal spending cuts over the next decade. He proposed eliminating all Federal taxes on capital gains, interest income, stock dividends and one’s personal estate. (While cutting the capital gains tax rate substantially has support on both sides of the ideological spectrum as a good way of facilitating investment, the elimination of all of these taxes could leave some people whom inherit independent wealth and then make all their income from stock speculation without ever working would have no Federal tax liability.) Unsurprisingly, he called for making both personal and corporate income taxes flatter and lower–but he also opposed eliminating any personal income tax deductions or tax loopholes in order to find new tax revenues. Essentially, Pawlenty proposes to increase the Federal deficit by $2 trillion over the next decade before he undertakes any measures to reign these supposedly-disastrous deficits in–and on the basis of a supply-side economic theory that seems to lack empirical grounding in a global economy. He proposed privatizing the United States Post Office, the Government Printing Office, Amtrak, Fannie Mae and Freddie Mac on the rationale that they “were all built for a time in our country when the private sector did not adequately provide those products,” and that today it can and will.
Pawlenty also claimed that these radically free-market policies for the Federal Government would increase the annual rate of US GDP growth from an historical average of 2%-3% to a bounding 5%.
For a Republican Presidential Primary, Pawlenty adopted an interesting and probably wise strategy: If there are doubts the enthusiasm of other candidates for the election, run towards your party’s base as the dark-horse candidate. But what’s wrong with Governor Pawlenty’s policy vision? Well, besides pretty-much all of its particulars, there is 1 other thing: Governor Pawlenty has promised something he can’t deliver. (I’m actually not talking about the political plausibility of his government-cutting proposals; given the as-yet-unlikely event of a Pawlenty Presidential Election victory in 2012 it would be highly likely that his fellow-Republicans would have a padded House majority and a small majority in the Senate. A likely large Democratic Senate minority would probably be able to muster the will to filibuster specific program cuts, but geographic dispersion to Red States tends to make Senate Democrats fractious in the face of a Republican President, so a President Pawlenty–Huh, there’s a reason to re-elect President Obama right there–might find some Democratic Senate allies to negotiate agreements on yet-more Federal budget cuts.) The thing Governor Pawlenty has promised us, based upon slashed taxes and Federal regulations, is an average 5% annual growth in US gross domestic product.
It would be fair to say that Governor Pawlenty believes that if the United States were governed like one of the nicer banana republics, it would enjoy their relatively rapid rate of economic growth as a result. The problem with this is simple: The United States is a developed country. It is true, as Conservatives maintain, that taxes, regulations and social welfare spending have some potential to reduce investment, channel investment into sub-optimal economic activities and increase inflation; many Western countries experienced this reality in the 1970s, resulting in the Conservative “Reagan Revolution” in the United States and “Thatcher Revolution” in the United Kingdom among other things. But there is a difference between the harsh but at times realistic motive to cut inefficient items out of the Federal budget and a belief that eliminating ideological targets among Federal programs or regulatory structures will deliver faster economic growth than the United States has ever sustained over a generation. (In the last quarter of the 1800s, US GDP grew at an average annual rate of 4%. That is impressive, but that late-bloomer of globalization, China, has more than doubled that 25-year growth rate.) The simple fact is that, while lowering the rate of certain taxes and removing certain regulatory barriers could certainly increase investment, development and hiring by making them more-efficient, it wouldn’t do this in a way that could give the United States developing country growth rates because those are more a product of relative gains in productivity due to the initial development of a country’s manufacturing sector and attendant infrastructure–relative to a low initial standard of living and likely delivering an increase in the productive capacity of such a country’s citizens by several orders of magnitude. Lower tax rates and fewer regulations simply cannot reproduce the economic growth rates yielded by the structural and demographic transition from agriculture to manufacturing. Washington Post op-ed columnist Ruth Marcus had an equally-snarky, more US-centric version of my incredulity towards Pawlenty in a good recent takedown column.
That Governor Pawlenty has even claimed to be able to produce such rates of growth in our gross domestic product year after year suggests that he lacks even a basic grasp of the economic forces he invokes in his criticism of President Obama’s policies or in his advocacy of market solutions. Naturally, we should bear this in mind whenever he gives us his rationales and reassurances for proposing the reduction or elimination of Federal programs; after all, it’s easy for a man to feel contempt for something he doesn’t understand–the government he wants to lead included.