Pawlenty: 5% Growth Will Save Entitlement Programs

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John Hinderaker offers a summary and analysis of Tim Pawlenty’s speech in Pawlenty Steps Out. A key point of Pawlenty’s position is that we can overcome our spending problems with growth—5% a year, more than we experienced in the 80’s or 90’s.

I’ve said before, and it’s worth saying again, that with high rates of growth, a lot of problems disappear. If you’re earning 5% more each year, and you’ll keep earning that much more for the foreseeable future, borrowing as much money as you can at 4.5% makes a whole lot of sense. You aren’t really bankrupting your future because the future will pay for today and then some. However, you are still missing out on tremendous opportunity.

What 5% growth means is that roughly every 12 years the economy doubles. That means your salary doubles. Your neighbor’s salary doubles. That’s not due to inflation either: that’s real spending power. That means as a country we can afford twice as many wide-screen TVs, twice as many cars, twice as many homes than we could 12 years ago. This is an awesome thought.

However, if you borrow before you realize the benefits, then you will not experience the actual growth you’d like to see. This is because you’ve already spent the growth that comes in the future. Ask a doctor who makes $250k a year (if you can find one) how much money he spends. He’s probably living like he only earned $100k, because he’s saving for his eventual retirement but especially because he has a huge debt—a debt for his education, for his practice, for his machines and more.

The real answer to real growth is cutting spending. You cut the spending until you have a balanced budget, and then cut more so you can lower the real tax rate, then you will see people who are all twice as rich as they were 12 years ago. Heck, with modern technology, there is no reason why we can’t see a 10% or 15% growth rate in actual wealth and value created. That would correspond to doubling your income every 7 or 5 years. Imagine that—you have a child, and by the time he gets into kindergarten, you’ve already doubled your income and can afford twice as much as you could when he was born.

Liberals don’t want to, or maybe can’t, think about growth. They don’t realize that the economic polices of free markets create wealth and allow the pie to grow bigger. In the booming ’20s we had remarkable growth, not unlike the bursts of growth that the country has seen before. The Asian tigers have seen the same kind of growth with the same policies.

It’s under the socialist and entitlement mindsets that we don’t see this anymore. Somewhere we came to believe that without the government, we can’t do anything, as if the government built the homesteads that turned into cities that now house the top industries in the world, and the government figured out how to invent, manufacture, and distribute the world’s economy.

I’m glad that we have two candidates who are running on a platform of growth. That’s what we need. Unfortunately, neither of them go far enough, because neither of them want to restore America to our founding principles of individual liberty and limited government.

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