Democrats have the wrong growth plan: Kudlow

Lucy Nicholson | Reuters. The proposals we've heard so far from Hillary Clinton and Bernie Sanders aren't going to jump-start the economy, says Larry Kudlow. · CNBC

The Democratic presidential debate ironically took place the same week that a Princeton University professor was awarded the Nobel Prize for economics. Why ironic? Because Professor Angus Deaton is a strong advocate of economic growth. Today's Democrats are not.

Here are some words from Professor Deaton, with a very big hat tip to my pal Jim Pethokoukis, the AEI economics columnist: "Economic growth is the engine of the escape from poverty and material depravation. Yet growth is faltering in the rich world ... Almost everywhere, the faltering of growth has come with expansions of inequality."

Deaton also said this: "Slower growth makes distributional conflict inevitable, because the only way forward for me is at your expense. It is easy to imagine a world with little growth but endless distributional conflict between rich and poor, between old and young, between Wall Street and Main Street, between medical providers and their patients, and between the political parties that represent them."

And yet, the professor said, "Even so, I am cautiously optimistic. The desire to escape is deeply engrained ... People may block the tunnels behind them, but they cannot block the knowledge of how the tunnels were dug."




The class warfare Deaton describes (endless distributional conflict) fits today's political climate to a tee. Now, I am not familiar with all of Deaton's growth-policy solutions. But thanks to Cato economist Alan Reynolds, I dialed up several videos of Deaton's presentations. One thing that stands out is his strong support of free trade and his strong opposition to trade restrictions. He is also very much against government-to-government foreign aid or World Bank subsidies. In one talk, he says the World Bank should be turned into a McKinsey-like consulting firm.

Deaton also stresses that economic growth is very important for health and happiness, and that it is absolutely essential to solving poverty.

Let me add this: Over roughly the past three decades, according to numerous international studies, the rise of free trade and free markets has reduced dollar-a-day abject poverty by 80 percent as nearly 1 billion people have moved into the middle class. This is mostly in Asia, but includes parts of Latin America and Africa. I have to believe Professor Deaton would cite this to back up his theories.

So now it's time to ask: Did the Democratic debaters mention growth? If they did, it wasn't all that much.



The Wall Street Journal estimates that the price tag on the proposals from Vermont Sen. Bernie Sanders of Vermont, an avowed "democratic socialist," would cost $18 trillion and Sanders has said he supports a top tax rate above 50 percent. Hillary Clinton wants to double the capital-gains tax. She wants middle-class jobs, but wants to tax the businesses that create them.