Tim Pawlenty's 5% Solution

Tim Pawlenty has proposed a bold plan. He would grow the economy at an annual rate of 5% for the next ten years and then at rate between 3 and 4% thereafter. It's bold but is it possible? The U.S. economy has grown at an average rate of about 3.2% since World War Two allowing for the negative growth rates during recessions and the recovery spurts of 6 to 7%. It has not grown at a 5% for a sustained period since the 1800's. The appealing aspect of the plan is its inspirational qualities. It would challenge the country to achieve a goal, something this country has not done since the "man on the moon in 10 years" challenge that JFK championed.

Is it doable? Well... it's a challenge and the biggest part of that challenge is getting the public to accept it or to take the dare. It is a sad fact of twenty-first century life that the idea of prosperity for all is a controversial ambition. The Obama administration is by no means pro-growth. Some would say, including this blogger, that it has displayed an open hostility to growth and the betterment of the whole country in favor of some drippy, no risk, green, socially just, reward your friends, don't offend the third world, construct. Pawlenty needs to change this thinking before his plan even has a chance.

Assuming Pawlenty can make the sale, what's stopping us? For starters an aging population that will need assistance from a sane immigration policy where the government actually selects the immigrants as opposed to the Dream Act mentality where the formally illegal immigrants select future immigrants. Also the country would have to trash can much of the regulatory structure that even in the best of times exacts a toll on economic growth. Throw in tort reform and tax reform and lower the corporate tax to the 10 to 12% range. Especially important would be eliminating what many of the boomer generation hold dear, the home ownership commitment. By subsidizing housing, both directly and indirectly by home mortgage tax credit the government has misdirected trillions of dollars of capital. Each generation buys larger and less affordable homes than the previous generation increasing the demand for more subsidies to buy even less affordable homes. Pawlenty would have to convince us to live in two bedroom bungalows and put our money in common stocks and certificates of deposit.