Washington Is Moving Toward the Supply Side

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

“Stop the bad stuff” is what John Boehner told a bunch of us at breakfast a few weeks before the election. That’s how he defined the GOP mission. Now he’s Speaker.

And now there’s an opportunity for both ends of Pennsylvania Avenue to move in the direction of a supply-side economic growth model to reduce chronic unemployment and really get the economy moving again.

You can’t govern from the House alone. Mr. Boehner knows that. But he also knows that you can stop the redistribution, the big spending, the overregulation, the tax hikes, and the war against business and investors.

The economy is picking up this new political vibe. Economic growth has shifted to 4% from 2% (even though the Fed hardly acknowledges this). Just in the last six weeks, indicators of better jobs and business confidence have been springing up everywhere.

 

The economic upturn probably started late last summer, but it has picked up steam since the elections. Car sales, ISMs, small-business confidence, 297,000 ADP private jobs, and brisk holiday retail sales — the indicators all look good.

What’s helping light things up? Low-tax-rate clarity. Stopping the pork-barrel, earmarked, omnibus spending bill. Now the potential undermining of Obamacare. Plus, the hope for broad-based spending limits, and even a corporate tax cut touted by Mr. Obama and hopefully the new House Republicans. Trust but verify. Right now I’m willing to trust.

If Obamanomics has been replaced by Tea Party Reaganomics 2.0, the revived Gipper approach is at heart an economic growth message — operating through free-markets, not government. It’s not simply budget bean-counting either.

Cut-and-grow seems to be the new House GOP mantra. That’s fine, as long as the cut part includes corporate tax cuts to grow the economy and complement the hoped-for spending cuts. Growth is essential to the GOP political future, as well as the nation’s health and wealth.

Over at the other end of Pennsylvania Avenue, Barack Obama won’t be the first liberal to move in the direction of supply-side growth incentives, especially lower tax rates. Think John F. Kennedy and William Clinton. Then and now, the motives are undoubtedly political. Fine. It’s the results that count.

Just today, the White House announced that Mr. Obama will speak before the Chamber of Commerce to improve relations with business. This is good. Next thing you know he’ll be speaking at a Tea Party event.

It looks like the president is Clintonizing his White House staff. He’s probably bringing in a businessman and former Clinton Commerce secretary, Bill Daley, to be chief of staff. He might pick former Clinton economic chief Gene Sperling to replace Larry Summers.

Mr. Clinton was a liberal who got mugged in the midterm elections, and he changed his stripes on the economy and taxes. Now we may be seeing Mr. Obama make the same transformation. But I repeat my own mantra: trust but verify.

There’s no smooth sailing ahead for the GOP. They’ll have to fight tooth and nail over the EPA carbon assault and the Obamacare health takeover if they’re to stop these monumental economy and job killers.

But stocks and the dollar are rising, and gold is falling. These markets are affirming the shift in politics and policy. We are moving toward the supply-side. That’s good. Haven’t been there in a while.

 

 

Mr. Kudlow is a frequent contributor to The New York Sun.


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