Pundits say elections are about the future, but they really are about both the candidates’ past and voters’ futures. This is certainly true when it comes to taxes and fiscal policy. On the Republican side there is already a lot of talk about what the candidates have done and what they plan to do.
Governor Romney would like the debate to center on the future. He alone among the top three GOP candidates has taken the No Tax Pledge from the Americans for Tax Reform (ATR). In his address at the Detroit Economic club he clearly positioned himself as a supply-side tax proponent, declaring: “Which course is better for America? A European model of high taxes and regulations? Or, low taxes and free trade — the Ronald Reagan model? That’s the choice the next President will make. Some are already fighting to implement a massive tax increase. Instead, we should make the tax cuts permanent.” In addition to personal savings accounts, free trade and regulatory relief he demonstrated his firmness on spending (while not so subtly playing on conservatives’ distaste for President Bush’s veto phobia), saying, “If Congress does not meet the spending targets, then its appropriations bills should be vetoed.”
Romney’s speech was a hit with economic conservatives. The press release by the Club for Growth stated: “As part of the Club for Growth’s ongoing analysis of presidential candidates and their economic policies, the Club for Growth commends Massachusetts Governor Mitt Romney for promoting a pro-growth, limited government agenda in his speech before the Detroit Economic Club today. The Club’s President, Pat Toomey, highlighted Governor Romney’s call for permanent tax cuts, tax reform, spending discipline, regulatory relief starting with the reform of Sarbanes-Oxley, and tort reform as ‘solidly pro-growth.’”
However, Romney’s past is less pristine when it comes to cutting taxes and limiting government. The Cato Institute gave him only a “C” grade on his final fiscal report card. Cato explained: “His first budget included no general tax increases but did include a $500 million increase in various fees. He later proposed $140 in business tax hikes through the closing of ‘loopholes’ in the tax code.” Cato was equally critical on the spending side, stating: “If you consider the massive costs to taxpayers that his universal health care plan will inflict once he’s left office, Romney’s tenure is clearly not a triumph of small-government activism.”
John McCain’s record, by contrast, harkens back to another Arizona Senator, Barry Goldwater, in its opposition to pork barrel spending, earmarks and government waste. Senator Jon Kyl, a fiscal hawk, vouches for his Arizona colleague, saying in a recent column: “In 2005, Senator McCain and I were two of the four senators to vote against the pork-laden highway bill. During the 109th Congress, Citizens Against Government Waste gave McCain a 91 percent rating, and Pork Busters, a collaboration of fiscal-watchdog groups, labeled him as an ‘Anti-Pork Hero’ in 2006.”
Nonetheless, McCain’s record on tax cuts has been mixed at best. ATR gave him an average rating of 83.6 percent on its scorecard since 1994, but was disappointed by his voting pattern during 1998-2002 when his average rating was just 66 percent. In particular ATR finds fault with his performance during the Bush presidency when McCain voted “no” on final passage of the 2001 and 2003 tax cuts and has not supported permanent repeal of the estate tax. In 2001 McCain was only one of two Senate Republicans to vote “no” on the Bush tax cuts, declaring “I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us at the expense of middle-class Americans who need tax relief.” ATR acknowledges McCain’s voting record has improved in the last couple of years, but attributes it to his presidential ambitions. In a more generous evaluation, the National Taxpayers Union, which compiles votes on all tax and fiscal matters, gives him an “A” for about two-thirds of the years between 1992 and 2005.
McCain’s future seems rosier for economic conservatives than his past. Although he has to date not signed the ATR No Tax Pledge, when asked in a recent interview if he would accept tax increases as president, he replied “No. None. None. Tax cuts, starting with Kennedy, as we all know, increase revenues. So what’s the argument for increasing taxes? If you get the opposite effect out of tax cuts?” He also expressed enthusiasm for many favorite items on the agenda of economic conservatives — retirement savings accounts, free trade and “profitable and free-market oriented” approaches to global warming. As for entitlement reform, he suggested that President Bush would have been wiser to fix the Social Security liquidity problem before tackling personal retirement accounts, displaying once again his longstanding commitment to fiscal discipline.
Rudy Giuliani, on the other hand, would likely be happy to compare his track record to his opponents’. He cut or eliminated 23 taxes (including the sales tax on some clothing, the tax on commercial rents outside Manhattan’s major business districts, and taxes on small businesses and the self-employed) totaling $8 billion while in office. Municipal tax revenues’ share of personal income was reduced by 18.9 percent and the top local income-tax rate by 21 percent. His response to calls for a post-September 11 tax increase? “A dumb, stupid, idiotic, and moronic thing to do.” Giuliani repeatedly cites as evidence of his faith in supply-side theory his cut in the local hotel tax rate from 6 to 5 percent, which increased revenues from $135 million to $239 million over 6 years. As for spending, he reduced it by 1.6 percent his first year in office, the largest cut since the Depression, and consistently kept spending increases below the rate of inflation. So far so good, economic conservatives would say.
Giuliani’s plans for the future, however, are murky at best. Like McCain he has so far declined to take the No Tax Pledge. In a recent speech at the Hoover Institution he gave a cogent analysis of the difference between the parties, saying: “I don’t think anything separates us more right now between Republicans and Democrats than how we look at taxes. What we understand as Republicans is that, sure, the government is an important player in this, but we are essentially a private economy. What Democrats really believe … is that it is essentially a government economy.” T date, though, he has not spelled out in any detail his position on many tax and fiscal issues. Would he abolish the estate tax? Does he have a view on personal retirement accounts? Is his reluctance to sign the No Tax Pledge a sign that taxes may be necessary? Michael Boskin, a senior fellow at the Hoover Institution and former chairman of the President’s Council of Economic Advisers, who was recently named Giuliani’s chief economic adviser, may be able to provide greater specificity and comfort for economic conservatives about Giuliani’s future plans.
So Republican voters will have interesting choices. Romney’s past seems questionable but he has successfully articulated an economic vision that impresses economic conservatives. With impeccable credentials on spending but a spotty track record on taxes, McCain also is attempting to shift the focus forward by combining his fidelity to fiscal discipline with his new full-throated embrace of tax cuts. By contrast, Giuliani has an impressive record on spending restraint and tax cuts but has yet to spell out a comprehensive economic program for the future. If one of them is to gain the support of Republican primary voters, he will have to convince voters that America’s economic future will be brightest under his administration. Who the voters believe depends in large part on what the candidates have done, not just what they now say.