It appears that Republican presidential candidate Tim Pawlenty may have been taking economic advice from Jesse Kelly, the Republican who lost to Congresswoman Gabrielle Giffords last year. During his unsuccessful campaign, Kelly said the key to improving the economy was 10 percent GDP growth over 20 or 30 years. As I reported at the time:
Kelly's economic strategies are, to say the least, a work in progress. At times, they seem to slide into the delusional.
"We need robust economic growth in this country," Kelly said at an appearance last week. "We need to welcome businesses not only to expand, but to come back from all over the world. ... To get out of this debt, when you hear things like 2 percent growth in GDP or 3 percent growth in GDP—that's gross domestic product—we need 10 percent. And we need it for decades. We need 20 to 30 years of 10 percent GDP growth to get out of this."
After positioning himself as the candidate of tough choices, Tim Pawlenty drew widespread ridicule from experts across the political spectrum on Wednesday for his wildly optimistic economic plan.
Pawlenty unveiled his platform at a speech in Chicago, a combination of tax reforms and budget cuts that he said would yield an explosive economic recovery. The centerpiece of his proposal was setting a goal of 5% economic growth per year for a decade.
"Growing at 5% a year, rather than the current level of 1.8%, would net us millions of new jobs," he said. "Trillions of dollars in new wealth. Put us on a path to saving our entitlement programs. And balance the federal budget."
But a group of former CBO directors are lambasting the number, saying it's completely out of line with any mainstream assessment of the American economy.
"The trend growth rate is not going to be 5% in the United States," Douglas Holtz-Eakin, director of the CBO under President Bush and a top GOP advisor, told TPM. "The market just doesn't support that. It just doesn't."
While a brief spurt of high growth is not uncommon coming out of a deep recession, sustained 5% growth appears a bridge too far. Pawlenty cited expansion periods under Reagan and Clinton as models, but neither president achieved comparable numbers — in fact from 1980-2000 there was only time in which growth surpassed 5% at all, a 7.2% boom in 1984 that immediately leveled off the next year.
"It's impossible" Robert Reischauer, a former CBO director under Presidents Bush Sr. and Clinton, told TPM. "You get growth because of investment, an increased labor force, a rise in human capital, and innovation. Add all those components together and they don't sum up to 5% given what the labor force is going to be and the investment possibilities are."
Pawlenty's income-tax brackets also reflect the ones that Kelly (sometimes) supported: 10 percent and 25 percent. If 10 percent is good enough for Jesus Christ...