Ted Cruz rocked in the presidential race during the CNBC debate. His biggest breakthrough, even more important than his crowd-pleasing holding the media to account, was his credible prescription to get job creation, and equitable prosperity, roaring the way they roared in the Reagan days.
Cruz thereby seized, like nobody else yet has, the Reagan jobs-creation and income mobility mantle.
Reaganomics had two main legs. Both were widely ridiculed at the time. Both were vindicated by history.
The more famous of these was Reagan’s dramatic cutting of income tax rates, across the board, to stimulate economic growth, a policy drawn from Jack Kemp. The less publicly recognized, yet arguably even more important, leg of Reaganomics was the promise to restore high integrity monetary policy.
Forbes’s own editor-in-chief Steve Forbes is the most celebrated supply-side thought leader since the departure of Jack Kemp. And Steve Forbes has maintained his very own “dual mandate” — holding high the torch for a flat tax and for the gold standard, both in the service of job creation and a climate of fairly distributed prosperity.
Cruz lit his torches from Forbes’s (and a handful of Forbes’s peers).
Let’s, first, go for the gold.
We know that Sen. Cruz struck gold from the reaction. Immediately the Empire — which is to say the left — struck back. Soon the Sith Lords at the New York Times and Washington Post — hello Paul Krugman, hello Matt O’Brien! — will launch their TIE fighters against Jedi Master Cruz as his X-Wing nears the Death Star, which Cruz has called a “Star Chamber,” the Fed. Krugman, using a favored cheap trick — reprimanded as “guilt by association” when used by Joe McCarthy — already has laid down a small marker of his Displeasure.
CNBC, now universally mocked for the perversity of most of its questions, promptly unleashed an attack on Cruz by Matt Clinch based on the commentary of one gold trader and anti-gold standard hysteric Krugman, Ted Cruz calls for the gold standard. No statement by any of many respected gold standard proponents was reported. (This could be evidence of media bias, though maybe it’s just very sloppy reporting.)
The following day, Alan Pyke at the hard left ThinkProgress.org, hit Cruz with a bit of agitprop headlined Cruz Embraces Fringe Monetary Policy That Went Out of Style In 1930s. It is so full of mistakes that there are insufficient pixels in the galaxy properly to enumerate its errors and omissions… and pointless to do so. The verve of Mr. Pyke’s propaganda is stirring. And yet surely even ThinkProgress’s credulous readership deserves higher quality propaganda than this.
So, too, do the readers of the Huffington Post (for which I occasionally write) deserve better propaganda than that of “bookkeeper, political observer, and chess enthusiast” Marvin Meadows. Meadows used his column to attack Cruz for raising the gold standard. He relies in part mostly on the work of O’Brien and on claims made by New York Times blogger Bruce Bartlett that the gold standard would help “re-create the conditions for ‘greater economic instability, higher unemployment and longer recessions.’”
These are canards handsomely refuted by the Bank of England’s Financial Stability Paper No. 13. It does not appear that either Meadows or Bartlett have reviewed this white paper. Why let mere facts get in the way of a good polemic?
Sen. Cruz nailed the best question of the debate, on the Fed, by Rick Santelli (whose 2009 Jeremiad famously triggered the creation of the Tea Party). Cruz:
I have got deep concerns about the Fed. The first thing I think we need to do is audit the Fed. And I am an original co-sponsor of Rand Paul’s audit the Fed legislation.
The second thing we need to do is I think we need to bring together a bipartisan commission to look at getting back to rules-based monetary policy.…
We need sound money. And I think the Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold.
There, of course, is much more to say. One hopes Cruz will say it. As it happens median family income began its long stagnation directly after Nixon closed down the Bretton Woods gold-exchange standard. Elite incomes began to skyrocket.
Sen. Cruz would do well to consult with Lewis E. Lehrman (whose eponymous institute I once professionally served), the Éminence Grise of the classical gold standard, and his protègé John Mueller, who served as Jack Kemp’s chief economist. These are the chief architects of what I elsewhere called Kemp and Reagan’s “unfinished symphony,” The Gold Standard Act of 1984.
Cruz is on to something really powerful. The fire of the MSM and ire of the left leaves no doubt as to which side Cruz is on. This surely will further endear Cruz to the GOP base and, later, to independents.
For his call for “sound money… ideally tied to gold” Cruz drew glowing praise from Steve Forbes. Forbes tweeted out my own blog at ThePulse2016.com, published by the American Principles Project (whose sister organization I professionally advise). Forbes gave out this benediction:
“Ted Cruz gets it right on gold.”
Soon thereafter, Bill Kristol, one of America’s most respected public intellectuals, wrote, in The Weekly Standard, Cruz’s Golden Moment:
I was sympathetic to and impressed by Cruz’s response. First, monetary policy is a topic that deserves to be discussed in the presidential race…. I found it exciting to hear Cruz follow in the footsteps of Ronald Reagan and Jack Kemp and go beyond advocating sound money and monetary stability to mentioning gold.
Cruz’s call for, ideally, the gold standard drew condemnation by the left and praise from the right. Its most important factor, however, is the box office appeal of Cruz’s focus on setting to rights the Fed — monetary policy, in general, gold specifically — as a formula for restoring job growth and equitable prosperity.
As for taxes, I have been extremely critical of most of the GOP presidential aspirants’ tax proposals. Except for Rand Paul’s, these resemble more effigies of the Kemp-Reagan tax rate cuts which reignited robust job creation than the real deal.
Cruz now unveils a flat tax plan, authored by the co-architect of Reagan’s tax rate cuts Arthur Laffer. (Laffer reportedly also co-architected, with FreedomWorks’ Stephen Moore, a similar plan for Sen. Rand Paul.)
The main difference between Paul’s and Cruz’s plan appears to be that Cruz is campaigning on his flat tax whereas Paul simply announced his and turned his attention to other things. Emphasis matters. It matters a great deal. We voters, above all, desire growth.
The Tax Foundation finds the Cruz plan to be credibly growth inducing. It would increase the national debt by the relatively modest $768 billion over ten years — a small, in some cases tiny, fraction of the debt implied in the plans proposed by most of his rivals. The Tax Foundation summarizes:
- Senator Cruz’s (R-TX) tax plan would enact a 10 percent flat tax on individual income and replace the corporate income tax and all payroll taxes with a 16 percent “Business Transfer Tax,” or subtraction method value-added tax. In addition, his plan would repeal a number of complex features of the current tax code.
- Senator Cruz’s plan would cut taxes by $3.6 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $768 billion over the next decade when accounting for economic growth from increases in the supply of labor and capital and the much broader tax base due to the new value-added tax.
- According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly reduce marginal tax rates and the cost of capital, which would lead to a 13.9 percent higher GDP over the long term, provided that the tax cut could be appropriately financed.
- The plan would also lead to a 43.9 percent larger capital stock, 12.2 percent higher wages, and 4.8 million more full-time equivalent jobs.
- On a static basis, the plan would cut taxes by 9.2 percent, on average, for all taxpayers.
- Accounting for economic growth, all taxpayers would see an increase in after-tax income of at least 14 percent at the end of the decade.
“Accounting for economic growth, all taxpayers would see an increase in after-tax income of at least 14 percent at the end of the decade.” No “trickle-down” here. “Artesian well” economics, anyone?
It was unequivocally praised by supply-sider Stephen Moore (who himself called for moving toward the gold standard at the recent FreedomWorks 9/12 event). The Cruz Plan has drawn some mixed (both positive and negative) comments by libertarian and establishmentarian economists. Highlights were reported by the Washington Post’s resident conservative blogger Jennifer Rubin in The pluses and minuses in Ted Cruz’s Tax Plan.
GOP critics cited by Rubin have positive things to say about the plan as well as stated caveats. Even the Establishmentarian (Rubio-leaning) Rubin concludes: “if the tax plan is a sign of Cruz’s maturation as a lawmaker and candidate, Republicans should commend the effort.”
The New Yorker‘s John Cassidy doled out a harsh critique of the Cruz Plan, calling it “the most regressive and irresponsible one yet.” Cassidy, an elegant columnist and good progressive soldier, awkwardly spins the Tax Foundation’s analysis to get there. No, the left assuredly does not like Cruz.
Meanwhile, Obama’s commissioner of the IRS John Koskinen spoke critically of the not-then-yet specified Cruz plan just before it was released. As reported by Politico:
There is also the question about what to do with all the tax credits now administered by the IRS, like the Earned Income Tax Credit, Child Tax Credit, education tax credits and others.
“If you want to have everybody do [tax filing] with just a postcard, then you have to decide you want to get rid of all those,” Koskinen said. “I have to say, it’s not my policy choice.”
To be publicly attacked by the IRS commissioner “appointed by President Barack Obama to turn around the IRS after it took a black eye for giving extra scrutiny to conservative tea party groups seeking tax-exempt status” is political manna from Heaven. Cruz really should send a box of chocolates, a dozen roses, and a handwritten thank you note to Commissioner Koskinen.
Cruz powerfully, with authenticity, now has laid claim to the Reagan (and Kemp) mantle of equitable prosperity. Will he be able to keep it? Only one other candidate, policy-wise, is within striking range: Sen. Rand Paul.
Paul may contend for it. One hopes he will.
Rubio was inspired by Kemp. Perhaps he, too will rise to the challenge.
That said, Cruz already has taken it up to the next level. Cruz is raising the ante by invoking gold. (Sen. Paul’s father, the great Rep. Ron Paul, is famous for this. Sen. Paul himself has remained strangely mute.) Cruz is raising the ante by crusading on a flat tax in which “all taxpayers would see an increase in after-tax income of at least 14 percent at the end of the decade.”
Most of all, Cruz earns his claim to the Reagan, and Kemp, mantle by proposing these measures as a way to reignite job creation and economic growth for working men and women. Supporting the aspirations of workers to achieve affluence through honest work in a free market is classic supply-side economics. And it’s the beating heart of the American Dream.
Originating at Forbes.com
