Earlier this month I counseled that Republicans could not win this year by "massaging Larry Kudlow's erogenous zones." Mitt Romney's economic team apparently thinks otherwise. The former Massachusetts governor is now proposing 20 percent across-the-board tax cuts.
My gut reaction is that Romney, as always, is full of baloney. His campaign released a detailed, 59-point "Plan for Jobs and Economic Growth" last September. What has changed since then to compel Romney that we need 20 percent rate cuts, rather than making permanent the Bush tax cuts as he originally proposed?
If anything, the economy is showing signs of improvement. I'm guessing this has something to do with Romney's tougher-than-expected primary fight. In which case, the new pitch is still boneheaded.
Let's forget the image of Kudlow getting a massage and put it in non-anatomical terms: I don't think a majority voters are going to respond enthusiastically to the supply-side pro-growth agenda.
And why should they?
In 1996, Sen. Bob Dole, sensing that the GOP wanted him "to be Reagan," and with supply-side guru Jack Kemp as his running mate, proposed 15 percent across-the-board tax cuts. Amid the prosperity of the mid-'90s, the promise fell on deaf ears. It's easy to remember why: Real wage growth for private-sector workers from 1991-2001 averaged 1.3 percent a year. President Bill Clinton was re-elected in part because voters figured they were doing fine, even under comparatively higher tax rates.
In 2001, President George W. Bush managed to do something like what Dole and Kemp wanted to do. And how'd it work out? I think the honest conservative must answer, at the very least, "not as well as we would have liked."
As economist Bruce Bartlett notes, even if you discount the significant loss of revenue, the '01 reforms did not deliver on their promise of robust growth:
It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year.
So let's review: Income tax cuts elicited a bored shrug in 1996, when times seemed good. They failed to spark growth as promised in the aughts. And, in the wake of the '08 crash, we've got a giant revenue problem that's only going to get worse as baby boomers retire.
Why in God's name would anyone think across-the-board tax cuts are a good idea right now? Romney's proposal is both an electoral dead-ender and a fiscal train wreck waiting to happen.
Nice going, Hubbard!