Bush Could Still Ride 4% Growth To Victory
Despite his disastrous performance in the October 28 debate, Jeb Bush could still pull out a win for the Republican presidential nomination. However, to have any chance of doing so, he would have to go back to his “4% growth as far as the eye can see” message. And, he would have to persuade the American people that: 1) he really means it this time; and, 2) he truly understands how to deliver on that goal.
The high point of Jeb Bush’s campaign for president occurred at its inception. Bush’s announcement speech, which was delivered on June 15, 2015, could have been written by Jude Wanniski.
In his influential 1978 book, The Way the World Works, Jude Wanniski noted that a democracy tends to evolve around a two-party system, featuring a party of economic growth, and a party of income redistribution. Wanniski further observed that the electorate prefers a credible plan for rapid economic growth to a program of government-forced income redistribution.
Regarding the 2016 election cycle, Wanniski’s “political model” would predict that the electorate would select (via the primaries) the Republican candidate that they believed best understood how to produce vibrant economic growth, and that this candidate would subsequently defeat the (inevitably redistributionist) Democratic candidate in the general election. (Wanniski’s model assumes that a candidate does not unduly frighten the electorate with his or her positions on important non-economic issues.)
Only 387 words into his announcement speech, Bush said:
“So many challenges could be overcome if we just get this economy growing at full strength. There is not a reason in the world why we cannot grow at a rate of four percent a year. And, that will be my goal as president – four percent growth, and the 19 million new jobs that come with it.”
The first two assertions that Bush made in the above paragraph are true. A real GDP (RGDP) growth rate of 4% is both achievable and sustainable, and this level of economic growth would quickly overwhelm America’s problems. Furthermore, the electorate knows that these propositions are true, so they are looking for a leader that knows this, too.
If our economy had grown at 4%/year from 2000 to the present (instead of at 1.76%), our economy would be about $6.8 trillion, or 38% larger right now. We would be at full employment, rather than 13.8 million FTE* jobs distant from it. Average wages would be at least 25% higher than they are today. And, far fewer recent college graduates would be living in their parents’ basements and working at Starbucks.
With 4% RGDP growth since 4Q2000 (and all else being equal, including our bloated level of spending), the federal government would have run a FY2015 surplus of $805 billion, rather than a deficit of $435 billion. No one would even be talking about cutting Social Security and/or Medicare benefits.
From that moment that Bush declared that his #1 objective was 4% growth, the Republican nomination was his to lose. All Bush had to do was to convince the electorate that he was truly committed to the goal, and that he had an accurate mental model of the economy, so that he could deliver on his objective, once in office.
Unfortunately, it now appears that Bush isn’t, in fact, really committed to his 4% growth goal, and that he doesn’t understand the economy well enough to deliver 4% growth. If Bush wants to pull his campaign out of freefall and claw his way to victory, he must execute a sharp turnaround regarding both of these issues.
Let’s look at the record.
During the first Republican debate, on August 6, Bush did talk about his goal of 4% growth, but only in response to a direct question about it. He did not mention it in his closing statement, in which he was free to say anything that he wanted to say.
On September 16, during the second Republican debate, Bush did not bring up his goal of 4% growth in his opening statement. In fact, he didn’t mention it until his closing remarks. This was telling, since it is good practice for candidates in televised debates to take every opportunity to hammer home their basic theme.
Bush did give a decent pitch for “a 4% growth strategy” in his closing remarks. Unfortunately, he compromised his message somewhat by asserting that his plan would also:
“…deal with the structural fiscal problems that exist because of our entitlement problems that will overwhelm and create way too much debt.”
The problem with this statement is that, with sustained 4% RGDP growth, there are no “structural fiscal problems.”
Last Wednesday, October 28, during the third Republican debate, rather than devote his first chance to speak to touting his plan for 4% growth, Bush launched an attack on Marco Rubio’s Senate attendance record. This did not go well.
When the debate turned to Social Security and Medicare, Bush said:
“But we also need to reform Medicare and Social Security. We can’t just allow it to continue on its current path the way that Hillary Clinton wants to do because there’ll be major reductions in benefits in the next decade if we do nothing.”
Later in the debate, Bush said:
“I have a plan to grow the economy at 4 percent, but you’re gonna have to make adjustments for both Medicare and Social Security.”
Bush could only say things like this is if he doesn’t understand the power of sustained 4% RGDP growth, and/or he isn’t serious about delivering it. A real economic growth rate of 4% would solve all of the financial problems of Social Security and Medicare, with no tax increases and no benefit cuts.
The only candidate that seemed to understand that fast economic growth would completely solve our entitlement problems was Donald Trump. Meanwhile, Governor Huckabee gets credit for making the vital point that health is more important than money (i.e., health itself is more important than how we pay for health care), and that the only way to truly cut Medicare costs is to defeat the four major diseases of aging (cancer, Alzheimer’s, heart disease, and diabetes).
Bush did not mention his 4% growth plan during his closing remarks.
Perhaps most telling indicator of where Bush really stands is the “Issues” section of his campaign web site, which does not mention the 4% growth goal at all.
A Bush comeback is a long shot at this point, but it is not impossible. Here is what Governor Bush would have to do:
- Make “4% growth” the touchstone for everything coming from him and his campaign. Because 4% growth does, in fact, solve every problem that we have (or at least render them solvable), this goal would be easy to explain and defend.
- Make a major speech on monetary policy. Bush would have to explain what Alan Greenspan, Ben Bernanke, and Janet Yellen have done wrong, and to call for a rules-based monetary reform plan. (Hint: the Fed should just bring the CRB Index, which closed on Friday at 194.65, up to 300.00, and keep it there.)
- Revise his tax reform plan to make it much simpler, much more “pro-growth,” and much more of a net tax cut (when “scored” by the CBO). The federal government does not need, and it should not be granted, more than 15% of an economy that is growing at 4% real. The corporate income tax, the death tax, and the capital gains tax should be simply eliminated. This would maximize capital investment within the U.S., and thereby maximize American economic growth, employment, wages, and general prosperity.
- Make it clear that he understands that sustained 4% economic growth will solve the financial problems of Social Security and Medicare, with no tax increases and no benefit cuts. In fact, Bush should call for a 1% across-the-board increase in Social Security benefits. This would deprive the Democrats of the issue that they most love to demagogue during a presidential election.
- Make it clear that he wants to eliminate counterproductive and unconstitutional spending, but that he is willing to invest in core federal functions that offer good returns on investment. Bush must emphasize growth, rather than “austerity.”
- Adopt Mike Huckabee’s health care “cure strategy” in its entirety, and offer Huckabee the job of implementing it during the upcoming Bush administration.
- Defuse the issue that brought Donald Trump to prominence, by promising to enforce our existing immigration laws, while calling for immigration reform that benefits everyone: existing Americans, as well as immigrants. Recognizing that many consider immigration to be an existential issue, he should demand that any immigration reform plan be ratified by a direct vote of the people.
- Promise that he will terminate Obama’s administrative jihad against “climate change,” and allow Congress to deal with the issue, as provided in the Constitution.
More than ever before, the theme of the upcoming elections will be, “It’s the economy, stupid!” Governor Bush still has a chance to be our 45th president, but he must act quickly and decisively to recommit to the goal of 4% growth, and to demonstrate that he understands what it will take to get us there.
*Full-time-equivalent jobs. FTE jobs = 1.0 X (full-time jobs) + 0.5 (part-time jobs)
Originally posted on Real Clear Markets.