John McCain likes to say he is for economic growth. “End growth in America, and the lights go out all over the world,” he has admonished. He offers a version of the narrative that Republicans have pitched for years: Their party stands for lower taxes, less regulation and freer trade; Democrats stand for tax-and-spend, government intrusion and trade protectionism. But this juxtaposition, at times reasonably persuasive, now rings hollow. The real pro-growth candidate in this campaign looks to be Barack Obama.
McCain’s problem is that his party’s standard economic pitch has become less and less relevant. Lowering taxes was terrifically pro-growth in Ronald Reagan’s time, when the top income tax rate was slashed from 70 percent in 1980 to 50 percent in 1982, significantly changing incentives for work and risk-taking. But with the top rate at 35 percent today, a modest shift in either direction makes less difference. Given the yawning budget deficit and the coming demographic crunch, tax cuts aren’t affordable anyway.
The same goes for deregulation. Getting the nanny government out of trucking and airlines yielded huge benefits in the 1970s and 1980s. But the “price-and-entry” regulations that used to cosset such industries have long since gone, and remaining regulation is harder to demonize. We are left with government rules to protect the environment, check the safety of medicines and prevent systemic financial crises. These rules are generally helpful. There’s nothing “pro-growth” about bashing them.