Pawlenty says Obama instigates "class envy," calls for big tax cuts
Updated at 1:20 p.m. ET
Republican presidential contender Tim Pawlenty is delivered a one-two punch on the campaign trail today, charging that President Obama has stoked "class warfare" at the expense of the economy, while laying out his most detailed economic plan to date.
In a speech delivered at the University of Chicago this morning, the former Minnesota governor promised that as president he would aim to grow the economy at a rate of 5 percent annually, rather than the current rate of less than 2 percent.
His plan to do so calls for a simpler income tax system with lower rates, eliminating the capital gains tax and other taxes, privatizing significant government-linked programs like the Post Office and rethinking all government regulation.
While delivering specific policy proposals that were absent from his official entry into the GOP presidential primary, Pawlenty also played some politics in his speech.
"Regrettably, President Obama is a champion practitioner of class warfare," Pawlenty said. "Elected with a call for unity and hope, he has spent three years dividing our nation, fanning the flames of class envy and resentment to deflect attention from his own failures and the economic hardship they have visited on America."
The state of the economy is likely to be the Republicans' most resonant message in the 2012 elections, especially if unemployment continues to linger around 9 percent. A new Washington Post-ABC News poll shows that nearly six in 10 Americans believe the economy hasn't yet recovered from the recession.
In a theoretical match-up between Pawlenty and Mr. Obama in the poll, Pawlenty wins 41 percent in the Post poll to Mr. Obama's 50 percent.
"How did you enjoy your economic recovery last summer? Well, that's what President Barack Obama said we were having," Pawlenty said today. He gave the same commentary in a Chicago Tribune op-ed. "He wrongly thought the stimulus, the bailouts and the takeovers were the solution. He said they worked."
Pawlenty's plan for economic recovery stands largely on modifying the tax code. He proposes cutting tax loopholes and instituting a three-tiered individual income tax. Those who currently pay no income tax would continue to pay nothing. After that, he suggests the first $50,000 of income - or $100,000 for married couples - would be taxed at 10 percent. Everything above that would be taxed at 25 percent. Pawlenty says he would also eliminate the capital gains tax, interest income tax, dividends tax and the estate tax.
Cutting the individual tax rate would spur job growth, Pawlenty argues, since small and medium-sized businesses are often taxed under individual rates.
After he delivered remarks, one member of the audience questioned Pawlenty's allegation that Mr. Obama has been stoking "class warfare." Given that two rounds of tax cuts over the past decade have favored the wealthy, and Pawlenty is suggesting more, the audience member asked Pawlenty who was winning that "class war."
In spite of his charges against the president, Pawlenty said he would like to "try to transcend the class warfare rhetoric and get back to reality."
For most Americans, he said, the only true quest is "whether they have a job or not."
Pawlenty used the opportunity to bring up his personal background and point out that he comes from a background "that is not of wealth," giving him a "different perspective" than others.
In addition to modifying income taxes, Pawlenty suggests slashing the business tax rate from 35 percent to 15 percent. "American businesses today pay the second highest tax rates in the world," Pawlenty said. "That's a recipe for failure, not adding jobs and economic growth.
Calling regulations a "hidden tax," Pawlenty suggests requiring the sunsetting of all federal regulations, unless specifically sustained by a vote of Congress. He also calls for capping and block-granting Medicaid to the states, raising the Social Security retirement age for the next generation, and passing a constitutional amendment requiring a balanced federal budget.
The former governor touts his success in balancing the budget in Minnesota while in office, but Democrats have been quick to point out that he left behind a projected $5 billion deficit.
"I think it's ironic that he's talking about a fiscal plan for the entire country when he left his state a mess," current Minnesota Gov. Mark Dayton told the Associated Press. "He decided he was going to leave and left it to his successor. They knew they were going to kick this down the road."
To prove his goal of 5 percent growth is attainable, Pawlenty pointed to eras of growth under the Reagan administration and the Clinton administration. Some pundits have pointed out that those periods of growth followed tax increases -- while Pawlenty is advocating for cuts across the board. On top of that, the Washington Post points out that as a share of GDP, taxes are currently lower than they were at any time during the Reagan or Clinton years.
Mark Robyn, an economist with the nonpartisan Tax Foundation, said that tax rates during those periods were only "one piece of the puzzle."
"There are a lot of variables that go into the macro economy," he told Hotsheet. "Economists on both sides try to reconcile their views with data that agrees with them. Ultimately, presidents probably get way too much credit for a good economy and get way too much blame for a bad economy."
Robyn continued, "It's impossible for me to say whether Pawlenty's plan will cause us to have some great economic boom."
If Pawlenty did, in fact, reduce rates and close tax loopholes in a revenue-neutral way, "that would be a fairly significant change from what we have now, in a good sense," Robyn said. But, he added, that's a tough promise to keep.
"A lot of politicians will talk about that kind of stuff, but when it comes down to it, the politics becomes very difficult," Robyn said.
Pawlenty is far from the only politician calling for significant tax reform, however. Just today, Mr. Obama called for tax reform as part of a plan for long-term economic stability. Reports this year indicate Mr. Obama wants to keep his reforms revenue neutral.
