Pawlenty proposes deep tax cuts, ending mail delivery, mortgage help

Pawlenty proposes deep tax cuts, ending mail delivery, mortgage help

Kevi Diaz
Minneapolis Star Tribune
June 7, 2011

In the first major economic speech of his presidential campaign Tuesday, former Minnesota Gov. Tim Pawlenty proposed dramatic cuts in corporate and individual tax rates, along with deep spending cuts that would end the federal government’s role in delivering mail, running trains and backing home mortgages.

Speaking at the University of Chicago business school, Pawlenty delivered a sweeping plan for shrinking government, encapsulated in what he called the “‘Google Test.’ If you can find a good or service on the Internet, then the federal government probably doesn’t need to be doing it.”

As he seeks the Republican presidential nomination in 2012, Pawlenty would cut the corporate business tax rate by more than half, from 35 percent to 15 percent. Individual rates would be simplified to two tiers: 10 percent on income up to $50,000 ($100,000 for married couples), and 25 percent for “everything above that.”

Presented as a pro-business prescription for growing the economy and creating jobs, Pawlenty’s speech outlined government reforms that would sunset all federal regulations unless specifically renewed by Congress, and grant the president emergency powers to freeze federal spending at current levels.

Pawlenty said he would consider impounding up to 5 percent of federal spending until the budget is balanced. Echoing an idea that has been circulating among GOP lawmakers, Pawlenty said that cutting 1 percent of overall federal spending for six consecutive years would balance the federal budget by 2017.

Pawlenty also took sharp aim at President Obama’s economic policies, which have emerged as a growing weakness in recent polls.

“How are you enjoying your recovery summer?” Pawlenty said. “That’s what the president said we were having. And that was last year… If that was a recovery, then our president needs to enter economic rehab. And the American people need to stop his policies. Cold turkey.”

Pawlenty said the economy can be revved up to perform better than the current “anemic” growth rate of less than 2 percent. He called for setting a “positive goal” of 5 percent, which he said is possible with pro-growth tax and regulatory reform.

“In short, we create more economic growth by creating more economic freedom,” he said.

Among those reforms, Pawlenty proposed ending taxes on capital gains, interest, dividends and inheritances, which Republicans call the “death tax.”

Pawlenty’s economic prescriptions relied heavily on his record as a two-term governor in Minnesota.

“I know government can cut spending,” he said, “because I did it in Minnesota.”

Pawlenty, as he often does, said he cut spending in real terms in Minnesota for the first time in the state history, suffering a government shutdown and a public union strike. “We didn’t close our schools, or empty out our prisons” he said. “We cut spending where it needed to be cut. We can do the same thing in Washington.”

He did not mention the details of budget shifts, federal stimulus spending, and K-12 school funds borrowing that Democrats say helped him keep state budgets in technical balance.

On the federal level, Pawlenty renewed his calls for a balanced budget amendment, as well as caps on federal spending as a percentage of the economy. He suggested the historical average of 18 percent of gross domestic product (GDP).

He also proposed capping and “block-granting” Medicaid to the states. As he has before, he also endorsed raising the Social Security retirement age, though he did not say by how much.

Taking on another major category of built-in government spending, Pawlenty said he would slow the rate of growth in defense spending.

But Pawlenty avoided any mention of the raging controversy over Wisconsin Rep. Paul Ryan’s plan to turn Medicare into a voucher program for future generations. Pawlenty has said he would sign the plan if he was presented no other alternatives as president, but he has also said he will unveil his own plan.

Pawlenty called Obama’s health care overhaul a “bad prognosis” for health care, and criticized Wall Street reforms passed by congressional Democrats, saying they will do nothing to resolve “the catastrophic scandal of Fannie Mae and Freddie Mac.”

Under Pawlenty’s Google Test, he offered a list of government services that could be privatized: “The post office, the government printing office, Amtrak, Fannie and Freddie, were all built for a time in our country when the private sector did not adequately provide those products. That’s no longer the case.”