Sunday, August 5, 2012

Tax Cuts and a Pipeline: The Kudlow-Romney Economic Plan

"Conservative" political/financial pundit Larry Kudlow (he's really a Keynesian) came out yesterday with this article,  The Jobs Report Bad News. He makes some valid points based on data but offers some not-so-conservative advice to improve the nation's economy. He also claims that it is Romney's plan. Here it is:
"My modest proposal for the worst economic recovery in modern times is threefold: Extend all the Bush tax cuts, slash the corporate tax rate, and approve and begin building the Keystone Pipeline. This is a supply-side proposal. It's completely unlike all of Obama's goofy, short-term, spending-and-tax-credit stimuli, which have completely failed."
Let's consider them one at a time:

1. Extending all of the Bush Tax Cuts would mean mounting raise the deficit by $3 trillion over ten years.  It's well understood that fiscal soundness of government policy is an important factor investors consider before expanding operations and hiring more workers. The fiscal problems of Greece, Italy, Portugal, and Spain are having a negative effects on the global economy. Kudlow proposes no tax cuts in his article. More red ink here in the U.S. would make things even worse. 

2. Slashing the corporate tax rate would further reduce government revenue at a time of record high corporate profits at a time when we need to pay down the deficit.

Let's not forget how the U.S. government got into the current fiscal hole: two big Bush tax cuts, the Iraq War, and Medicare Part D Prescription Drug Program - and none of it paid for. All of those items were put on the national credit card.

Larry Kudlow wants to keep running up the balance. Again, he doesn't propose any cuts in spending.

3. This one's a "red herring" issue. The Keystone Pipeline has been made into a political football by the Republicans. In a budget deal, the Republican-led House imposed a time limit on the Obama Administration to approve an international pipeline (Keystone) running from Canada to the Gulf of Mexico. This is a big, complicated project with economic, environmental, and societal impacts. Obama told the House they would not be able to approve it by their deadline. The Republicans now use the "delay" to blame the president for bad energy policy.

The fact is, the southern leg of the Keystone XL Pipeline has already been approved and is slated to begin construction. The rest of it will be likely be approved and built after the final route is determined. Obama and Kudlow apparently agree on this one - just not on the timing and the need for a thorough alternatives analysis.

Government procurement spending, that is, contracts between the government (taxpayers) and private corporations (ref) soared under the Bush Administration. Kudlow isn't calling for cuts in procurements. Sounds like he wants government financial support to corporations to continue.

Footnote: One-third of the "goofy" Obama stimulus consisted of tax cuts.