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The 4 percent growth idea is catching on. The latest evidence comes today in the Wall Street Journal’s lead editorial, “Ryan and the Right”. The Journal takes some conservative politicians to task for criticizing the new budget proposed by Wisconsin Rep. Paul Ryan. Two Republicans, Tim Huelskamp of Kansas and Justin Amash of Michigan, joined all the Democrats in opposing Chairman Ryan’s plan in a House Budget Committee vote last week (the budget passed, 19-18). The objection of the two GOP freshmen, as well as other conservatives, is that the proposal doesn’t balance the budget quickly enough. Ryan’s plan gets the annual deficit down to 1.2 percent of Gross Domestic Product (GDP) by 2022. A Democratic plan, which highlights major tax rate increases, reduces it to 2.7 percent by then. The non-partisan Congressional Budget Office (CBO) projects the deficit for fiscal 2012 at 7.6 percent of GDP, one point lower than in 2011 but, nevertheless, the worst for any year between 1946 and 2008. The CBO forecasts that, under current law, the deficit will drop to 1.2 percent of GDP – the same level as Ryan’s plan – but no one believes that “current law” will prevail. Under a more likely “alternative scenario,” which, for instance, retains indexing for the Alternative Minimum Tax and keeps Medicare reimbursements for physicians at current levels, the CBO projects deficits during the next decade in the range of 5 percent. That’s more than double the proportion that prevailed before the 2008-09 recession (between 2001 and 2008, the deficit averaged 2.3 percent of GDP). Deficits today are a problem. No doubt. But the Journal takes issue with critics of both parties who say that the budget can be balanced more quickly by raising tax rates – and, thus, putting a damper on the increased work and investment that boost growth. On the other hand, “Mr. Ryan wants to avoid a tax increase and reform the tax code because he realizes that the budget will never balance without economic growth faster than today’s 2% a year.” And that 2 percent figure is roughly what the CBO and a consensus of economists see prevailing for the next decade and beyond. Ryan’s budget also reduces spending from 24.1 percent of GDP to 19.8 percent. Spending is the problem, and lower federal spending boosts long-term growth. What the Journal’s editorialists understand is that growth is the key to increasing opportunity and prosperity in America. It is also the best answer to deficits and debt. As economist Alex Brill has calculated, increasing growth to 4 percent by 2017 and holding it there for the next five years will reduce accumulated deficits - that is, federal debt - by almost $4 trillion, which is just shy of the amount that the debt has risen during President Obama’s 38 months in office. As the Journal puts it: “Mr. Ryan is thinking ahead of his critics by focusing on the two most important priorities: growth and reform.” Absolutely right. It is appropriate that Rep. Ryan will be the featured speaker at the Bush Institute’s conference on “Tax Policies for 4% Growth” in New York on April 10. Growth is the answer, and jacking up tax rates won’t get us there. Lower rates, accompanied by reforms that eliminate preferences and broaden the base – that’s the ticket. This post was written by James K. Glassman, Founding Executive Director of the George W. Bush Institute.
James K. Glassman is the Founding Executive Director of the George W. Bush Institute and the interim Director of the Military Service Initiative.
He served as undersecretary of state for public diplomacy and public affairs from June 2008 to January 2009, leading the government-wide international strategic communications effort. Among his accomplishments at the State Department was bringing new Internet technology to bear on outreach efforts, an approach he christened “Public Diplomacy 2.0.”
From June 2007 to June 2008, Glassman was chairman of the Broadcasting Board of Governors (BBG). He directed all non-military, taxpayer-funded U.S. international broadcasting, including Voice of America, Radio Free Europe, and Alhurra TV. Glassman was a senior fellow at the American Enterprise Institute in Washington, D.C., from 1996 to 2008, specializing in economics and technology.
He has been moderator of three weekly television programs: Ideas in Action and TechnoPolitics on PBS and Capital Gang Sunday on CNN.
Glassman has had a long career as a journalist and publisher. He served as president of Atlantic Monthly, publisher of the New Republic, executive vice president of U.S. News & World Report, and editor and co-owner of Roll Call, the Congressional newspaper. Between 1993 and 2004, he was a columnist for the Washington Post and the International Herald Tribune and continues to write regularly for Kiplinger’s Personal Finance and Forbes. Shortly after graduating from college, he started Figaro, a weekly newspaper in New Orleans. His articles on finance, economics, and foreign policy have appeared in The New York Times, The Wall Street Journal, the Los Angeles Times, and various other publications.
Glassman has written three books on investing, and in April 2012 was appointed to the Investor Advisory Committee of the U.S. Securities and Exchange Commission. He was formerly a member of the Policy Advisory Board of Intel Corporation and a senior advisor to AT&T Corporation and SAP America, Inc.Full Bio
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