The race for House
majority leader now has a third horse: Arizona's John Shadegg.
Prior to this development, the two-horse race between Missouri's
Roy Blunt and Ohio's John Boehner had few conservatives excited,
although Boehner had been looking like the better bet over Blunt,
who has been tied to the seedy, backroom dealings of convicted
lobbyist Jack Abramoff. Blunt is the last thing Republicans need
right now, while Shadegg offers a clear path to returning the
GOP to the first principles of lower spending and ethical governance.
Hopefully, Shadegg,
who is not part of the Abramoff lobbying culture, will run on
the budget-cutting proposals of the Republican Study Committee,
in particular the RSC plan to end midnight "earmarks,"
which stealthily insert pork into bills without debate.
These earmarks are
not only budget-busters, they open the door to rogue lobbying,
where legislative favors are traded for cash. If the 100-member
RSC gets behind Shadegg, it could win in come-from-behind fashion.
This rebel group is full of change agents, people like Mike Pence,
Jeff Flake, Paul Ryan, Marsha Blackburn and Jeb Hensarling --
rising young stars in the GOP firmament. This crowd, of which
Shadegg is a longtime member, stands on bedrock conservative principles.
They all deserve seats at the leadership table of high Republican
policymaking.
Thursday's announcement
by the Bush administration of an expected $400 billion deficit
for fiscal 2006 again shows why budget-cutting in the RSC mode
is necessary.
Last year, about
$27 billion in earmarks made it into appropriations bills, while
another roughly $25 billion in earmarks was attached to the highway
transportation bill alone. But pork can be found everywhere. There
are a couple hundred billion dollars in farm and corporate-welfare
subsidies that can easily be scrapped. Coupling this with lower
tax rates on corporations, as recently suggested by Washington
economist Kevin Hassett, makes good pro-growth deficit-cutting
sense. But an across-the-board cut of all manner of pork is of
the first order for this Congress.
In the near term,
if business-as-usual budgeting does not come to an end, the investment
tax-cut extensions on dividends and capital gains will not pass.
The Dow at 11,000, reached just this past week, is an important
symbolic benchmark of the benefits of higher after-tax investor
rewards. The day those tax cuts passed the Senate in May 2003,
the Dow Jones average stood at just 8,601, according to Phil Kerpen
of the Free Enterprise Fund. The bull market since then has created
an extraordinary $5 trillion of new shareholder wealth. Meanwhile,
2005 marked the third straight year of strong dividend activity,
where dividend increases by publicly held corporations were 74
percent higher than 2002 levels, according to Dan Clifton of the
American Shareholders Association.
Ironically, the Treasury
Department has reported the first budget surplus for the month
of December in three years, as corporate tax payments hit an all-time
high. Total tax receipts were up 12 percent, while government
spending rose 5.6 percent. Of course, this is good. The Laffer
curve is working. At lower tax rates, stronger economic growth
is creating higher tax-revenue surprises.
But Wall Street economist
Michael Darda reports that federal spending increased 8.1 percent
during the last 12 months. Since 2001, the budget has expanded
6.6 percent per year, compared with only 3.1 percent growth during
the 1993-2000 Clinton years. Though supply-side revenues reduced
last year's budget deficit by about $100 billion -- moving it
down toward $300 billion, or roughly 2.5 percent of GDP -- a return
to a $400 billion deficit in 2006, as suggested by the White House,
will be political poison for tax-cut extensions.
Key senators have
told me that the upper body does not have the votes to lock up
this critical pro-growth legislation. And that was before the
White House advertised the $400 billion deficit estimate. At both
ends of Pennsylvania Avenue, the governing Republicans must show
taxpayers and voters that budgeting-as-usual will be stood for
no more.
I have little doubt
that if Shadegg becomes House majority leader, this untenable
situation will begin to turn around. At the very least, his run
for the post becomes a symbol of GOP efforts to grow the economy
and end corrupt big-government budget practices with a complete
reversal of policy.
These party caucus
elections are usually inside-baseball affairs that escape widespread
public notice. But given the Abramoff scandal, the continued overspending
by Congress, the sad new budget estimates and the failure of legislators
to renew supply-side tax-cut rewards for capital formation and
jobs growth, Shadegg's campaign becomes a very public affair --
a manifestation of the GOP's last chance before the midterm elections
to show the public that reform is possible.
Without speedy and
significant reform, it will be very difficult for Republicans
to restore taxpayer confidence in their ability to govern.
Lawrence
Kudlow is a former Reagan economic advisor, a syndicated columnist,
and the co-host of CNBC's Kudlow
& Company. Visit
his blog, Kudlow's Money
Politics.
