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.
