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Economic Freedom Fighters, Unite

A Commentary By Lawrence Kudlow

It must be something in the water. The ruling Democrats know their tax-hiking, re-regulating and big-spending policies have failed to rejuvenate job-creation or reduce the unemployment rate. And yet they persist in trying more of the same.

A recent New York Times editorial acknowledges that the economy is weak, but it pleads for yet another federal stimulus package. The Times editors want another round of unemployment benefits (this would be the third) to subsidize non-work welfarism. They also want more federal spending on state Medicaid -- an area that already has been showered with federal taxpayer money to no economic avail since it has nothing to do with economic growth.

Can't we do better?

Or let's take the case of Rep. Barney Frank, a smart guy. He told MSNBC that "the right wing took control of government and ruined it. They gave it a bad reputation. Now we are trying on every front to increase the role of government in the regulatory area."

Ah! Re-regulation. What a great idea. As I recall, the Soviet Union and old Eastern Bloc tried heavy government control and regulation, and it didn't work. The people rebelled. They wanted economic freedom, the right to keep their own money, the right to start their own businesses and the right to climb the ladder of success in a free economy.

Now here's a counter-thought. The Ronald Reagan free-market revolution, which included regulation lite, a sound dollar and low tax rates, launched a three-decade-long boom. And yes, the Gipper's policies were copied around the world. (What does Barney Frank know that the rest of the world doesn't?) Even the communists in China have adopted deregulated free-market capitalism.

The battle between democratic entrepreneurial capitalism and heavy-handed statism has already been won by the economic freedom fighters around the globe. That's one reason why the capitalist emerging economies in Asia, Eastern Europe and many parts of Latin America (think Brazil) are challenging U.S. economic supremacy and the American dollar.

Prodded by The New York Times and other media organs, the Democrats in Congress are going in the wrong direction. They don't seem to realize that growth and wealth come from individuals and human action, not the heavy footprint of the state.

Here's another example of drinking from the wrong water. Top administration economist Christina Romer delivered a very gloomy forecast to Congress last week. She said unemployment will remain at a "severely elevated level" and that the U.S. jobs market will stay painfully weak next year. She was just being honest.

Romer, who has written about the benefits of permanent tax cuts to stimulate gross domestic product growth, might in fact be sending a shot across the bow to her fellow Obamacons. She even said the Obama stimulus plan will contribute little to economic growth in 2010. From her own work, she knows that big-government spending and temporary tax credits have no economic-growth power.

So why not try something different? Unfashionable as it may be today, why not go back to the supply-side model of lower marginal tax rates for individuals and businesses, large and small? That's the model my late dear friend Jack Kemp successfully espoused to President Reagan more than 30 year ago. It's the incentive model of economic growth. At lower tax rates, where folks keep more of what they earn and invest, greater after-tax rewards spur greater work effort and investment risk. They also boost asset values. This is exactly what the economy needs: a rejuvenated dose of incentives -- permanent incentives.

Think of this: At the same wage level from cost-conscious businesses, a 10 percent personal tax cut provides a handsome after-tax wage-increase incentive that will spur individuals to go back to work -- simply because work will pay more after-tax.

When I spoke last week at the launch of the Jack Kemp Foundation in Washington, D.C., I emphasized the supply-side model of a sound dollar, flat tax rates, free trade, limited government and market-driven solutions for better schooling, more efficient health care and the amelioration of poverty.

Jack Kemp believed in these principles. He believed in growing the economic pie, not redistributing it. And he believed in growing it large. He would have hated today's notion of a "new normal" of 2 percent growth and high unemployment. He would have argued for the need to give everyone greater economic-empowerment opportunities and incentives. And he would be just as right today as he was when he began his crusade in the mid-1970s.

Kemp's universal principles have stood the test of time. His was a genuine growth solution, one that is essential to America's greatness, her boundless optimism, her prosperity and her success. Today's anti-growth economic policies would have driven him crazy. And he would have fought back.

That's the message for economic freedom fighters everywhere: Unite, and throw off your chains. Especially here in America.


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Views expressed in this column are those of the author, not those of Rasmussen Reports.

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