Today at Ronald Reagan’s famous “ranch in the sky” outside of Santa Barbara, the Young America’s Foundation is hosting a barbeque to celebrate the 27th anniversary of the most momentous piece of domestic legislation in the history of the conservative movement. That act, the famous Reagan-Kemp-Roth income tax cut (25 percent across the board), ushered in what is arguably the greatest economic recovery/expansion in the annals of civilization.
If John McCain wants to be president, he should learn from Reagan’s lesson. If conservatives want to keep the spectacularly inexperienced and dangerously left-wing Barack Obama out of the White House, they will press McCain to apply that lesson to today’s political landscape.
The lesson is this: Well-designed tax cuts are both good policy and good politics, but the latter half of that equation is true only to the extent that a leader packages them well and sells them relentlessly and enthusiastically.
Somewhat to McCain’s credit, his campaign has officially outlined a large array of tax cuts. Unfortunately, his proposals don’t seem focused. If they make any public impression at all, they come across as scattershot, themeless, and oversized. Mostly, though, they go unnoticed, because McCain either talks about them rarely (if at all) or else talks about them so ineffectively that they seem only an afterthought.
Granted, the McCain campaign is doing an effective job of painting Obama as a tax hiker. Scaring the public about the other guy raising taxes almost always works well if the charge is true, as it is in this case on several fronts. But at some point the attacks will wear thin, especially because Obama is so good at making a campaign as much about “tone” as it is about substance; and he will surely make headway before November in making an issue of McCain’s grouchy-old-man tone if McCain doesn’t leaven it with something more positive. At some point, a candidate like McCain must convince voters that he himself is for something that will make their own lives better. And it won’t work to just throw at them a laundry list of tax cuts, especially when the establishment media is waiting to pounce with its usual fear-mongering about the terrible “cost” to government of any tax cut not proposed by a liberal Democrat. Even well into the fall of 1980, for instance, polls showed the public tremendously uncertain about Reagan’s own tax-cut proposal — which the media portrayed as a dangerously radical plan — even though Reagan was an enthusiastic and effective salesman.
WHAT McCAIN NEEDS TO ADVOCATE is a single, simple, saleable, economically sensible tax cut that becomes as much his signature as the Kemp-Roth bill became Reagan’s by irrevocable adoption. And he must believe in it so thoroughly, so palpably, that nobody can doubt that he and his team believe it to be not just good politics but also, unambiguously, good and essential economics. (The example in the alternative was Bob Dole’s sudden embrace of a 15 percent tax cut when he was badly trailing Bill Clinton in 1996: Dole had always scoffed at supply-siders, and even with Jack Kemp as his running mate Dole was assumed to not really have his heart in the idea.) McCain must believe in it so much that he will defend it with heart and soul and, importantly, with utter clarity, no matter how Obama and Obama’s minions attack it.
(It will help, too, if he chooses a running mate who is skilled at talking about economics in public — a Chris Cox, once described as “omnicompetent,” or a John Kasich, of whom it can be said that he already oversaw a successful move to balance the budget while cutting taxes at the same time.)
If McCain does advocate his tax cut with conviction and clarity, the benefits could be huge. The public is tremendously frightened by the hiccups in today’s economy. Those fears constitute the single most defining issue of this campaign. And because most voters don’t possess firm convictions on matters of macroeconomics, they will sometimes respond favorably to whichever candidate makes the most confident and readily explainable case for his own economic plan. The good news is that if both candidates are equally confident, the public’s default position probably still remains that of favoring lower taxes and more freedom. It also helps, of course, that this default position actually is the one that works best in practice — that it is the wisest, most beneficial, and most fundamentally sound. If McCain completely identifies himself with this default position — in a targeted, comprehensible way — McCain might not merely defeat Obama, but trounce him.
In terms of sound economics, any of a number of tax cuts could send a beneficial jolt through the nation’s financial and job markets while largely “paying for themselves” via economic growth. For political efficacy, McCain would do best to choose only one tax-cut idea to sell to a public with a text-message attention span. Of several good ideas, almost any one idea will do. Here are some that could do the job well:
Completely eliminate the corporate income tax rate. I wrote about this here. McCain could sell it as a reformist attack on the Washington lobbying culture and as a way to bring jobs back home. Call it the “Insourcing Jobs and Outsourcing Lobbyists Act.”
The “Pluck of the Irish” Plan. McCain could play off his own Irish roots (lots of Irish-Americans fall into the “Reagan Democrat” swing-voter demographic) by calling for the United States to match, as exactly as possible, the various business-tax rates that Ireland boasts — the rates that produced the famous “Celtic Tiger” economy that has made Ireland the strongest economy in Europe, by far, for nearly two decades. For instance, Ireland’s top corporate income tax rate is 12.5 percent; McCain right now is playing “small ball” by calling for the top U.S. rate to be cut from 35 percent to 25 percent.
The “Pension Plan Protection Proposal.” Completely eliminate dividend taxes, or completely eliminate capital gains taxes. If the corporate income tax still exists (in other words, if McCain does not choose the first option, above), then capital gains taxes and dividend taxes amount to “double taxation.” If McCain sells one of these proposals as a way to bolster the pension plans of every worker, 401K owner, and current- or soon-to-be-retiree in America, he would not only be helping the economy tremendously but, again, would put himself on the side of key constituencies.
The Ponnuru Plan for Family Relief. The basic idea is this: Greatly expand the child tax credit as a boost to working families. Frankly, I do not favor this one (comparatively speaking), because I do not think it boosts supply-side incentives, do not think it is as affordable (because it doesn’t stimulate growth the way the supply-side cuts listed above do), and do think it would have several other unfortunate tendencies too complicated to thoroughly discuss here. But National Review‘s Ramesh Ponnuru nevertheless makes a strong case for it here .
There may be other good tax-cut ideas out there as well. And it’s not that all tax cuts are necessarily good ideas. Some really would bust a bigger whole in the national deficit and debt. After all, the Laffer Curve does have a low side of the curve, too: There is a point on the curve below which lower taxes do indeed bring in substantially lower revenues. But, especially on the business/investment side of the equation, American tax rates right now are on the wrong end of the Curve: They are so high that they seriously depress economic growth, and are terribly inefficient at raising revenues for the Treasury. They must be cut.
If McCain is the one pushing those cuts, especially with a memorably “catch phrase” and easily understandable explanation, he could break the stalemate in the current campaign. He should do so — and soon.
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