Budget Battle: Where's the Beef, GOP? by Larry Kudlow 7 May 2011 post a comment Share This: Are we headed for more political business as usual, where Republicans give up too much and get too little back in the debt-ceiling fight? Friday’s papers are loaded with stories on the GOP giving up Paul Ryan’s Medicare-reform package. It’s being called “political reality.” But let me ask this: Will they also give up any attempt to slow Medicare spending in the next couple of years, at least a down-payment on the budget deficit? And I don’t see much talk anymore about tax reform as part of the new package. But the economy still needs an incentive jolt, which could be supplied at least by dropping the business tax rate. Conservative Canadian Prime Minister Stephen Harper is moving to a 15 percent corporate tax rate. We’re still at 35 percent. Canada’s open for business. Are we? Friday’s jobs report was better than expected, with a 244,000 increase in nonfarm payrolls, even though the small-business household survey fell 190,000, edging up the unemployment rate from 8.8 to 9.0 percent. The Obama recovery has produced about two million new jobs. But compare that to the Reagan recovery that produced five million new jobs in its first two years. The current economic cycle is growing at less than 3 percent. Reagan’s first two years saw more than 7 percent growth annually. If today’s Republican party vacates the pro-growth position of flat-tax reform and clear spending reductions, it will lose the high political ground. The Obama administration wants deficit targets in the debt-ceiling bill. But that allows for tax increases. Will the GOP man up for a clear spending cap at 20 percent of GDP, with across-the-board budget-cutting penalties? Will they get any spending reductions at all? Will the deficit and debt outlooks in the next couple of years be lower? For all the talk about the bond market going nuts over the failure to increase the debt limit, 10-year Treasury rates have been falling, not rising. At this writing they’re 3.14 percent, down from 4 percent last year. So if the bond market isn’t panicking, why should Republicans? At Thursday night’s GOP debate in South Carolina, only Herman Cain had a real pro-growth message with his national sales-tax/fair-tax approach. But discussion of economic growth and unemployment was minimal. Gov. Tim Pawlenty, who has been meeting with supply-side leaders, failed to articulate a single supply-side tax-cut idea. And there was no talk of spending caps or spending cuts. What’s up with the national GOP? What’s up with the congressional GOP? Where’s the beef on economic growth and jobs?