Republican presidential candidate Tim Pawlenty has unveiled his economic agenda today with a speech at the University of Chicago. While the broad outlines of the plan are promising -- reductions in corporate and individual tax rates, a flatter tax system, and spending reductions -- the key will be how he fleshes out the specifics.
For instance, on the tax side, Pawlenty proposed slashing the corporate tax rate from 35 percent to 15 percent as well as cutting individual tax rates and maintaining just two brackets -- 10 percent and 25 percent. He also wants to eliminate taxes on capital gains, dividends and inheritance. That's all well and good, but to be able to achieve such reductions in rates without severely reducing revenues, the government would have to get rid of a lot of deductions in the current tax code. To his credit, Pawlenty recognizes this:
But our policies can’t just be about simply cutting rates.They must also promote freedom and free markets. The tax code is littered with special interest handouts — carve-outs — subsidies — and loopholes. That should be eliminated.
Such reform would not only help offset short-term revenue loss from the rate cuts. But it would also reduce cronyism — favoritism — and government manipulating markets for political purposes.
The problem is, he doesn't give much detail on which special interest handouts he wants to eliminate, nor does he expand on this in the section that deals with individual tax rates. It's easy to say you want to simplify the tax code in the abstract, but what takes a lot more political courage is going after the most popular tax breaks, such as the mortgage interest deduction.
This is similar on the spending front. To his credit, Pawlenty has come out in favor of raising the retirement age for Social Security and block granting Medicaid. But he hasn't yet unveiled a plan on Medicare. He talks a big game about passing a balanced budget amendment, capping spending and streamlining government. He even includes includes a gimmicky "Google Test" that says if you can find a given service on Google, then government doesn't need to be doing it (which if you stretch to the limit, it could lead to all sorts of implications). Again, laying out an approach to spending cuts is good, but it's a lot bolder to identify specific programs that will be cut.
So, overall, Pawlenty is heading in the right direction, but as the campaign goes on, they'll need to be more thoroughly fleshed out.