Arnold ascending with economic speech

By Larry Kudlow

National Review Online economics editor

CEO of Kudlow & Co.

NEW YORK -- With Reaganesque optimism, a vision of muscular Republicanism, and a ringing endorsement of President George W. Bush, California Gov. Arnold Schwarzenegger delivered a stunningly effective speech at the recent Republican convention in New York. The Governator also sent a strong message to immigrants, independents, and undecided voters that the GOP is a safe-harbor destination deserving of their support.

Establishing his credentials as a pro-growth supply-sider, the Californian told more than 25 million television viewers (more eyes than John Kerry got on the last night of the Democratic convention) that "If you believe that your family knows how to spend your money better than the government does, then you are a Republican!" He went on to talk about faith in the free-enterprise system and the resourcefulness of the American people. He slammed the pessimistic Kerry camp, saying, "Don't be economic girlie men!"

Schwarzenegger reminded viewers that the American economy is the envy of the world, with the highest economic growth rate of any industrial country. Then he mocked, "Don't you remember the pessimism of 20 years ago when the critics said Japan and Germany were overtaking the U.S.? Ridiculous!"

Let's examine this viewpoint.

Almost 25 years ago, Ronald Reagan, the true father of modern Republicanism, launched an economic-growth program of tax cuts, deregulation and trade liberalization. Since then, the U.S. has enjoyed virtually uninterrupted prosperity, registering only five negative GDP quarters since 1982. According to Federal Reserve statistics, family net worth during this period has grown by an astonishing 340 percent.

As the top marginal tax rate was slashed from 70 percent way back then to 35 percent under President George W. Bush, the economic pie has nearly tripled. Successful individuals have kept more of what they've earned through a near 167 percent gain in after-tax economic incentives.

Economist Bruce Bartlett has written that widespread American prosperity over the past two decades has depleted the ranks of the poor and middle class. Simply put, everyone has grown richer. The number of people at the low-end -- making less than $25,000 a year -- has dropped to 29 percent from 33 percent. The number making more than $75,000 a year has risen to 26 percent from 15 percent. The prosperous U.S. economy has silenced the class-warfare argument. It has lifted all the boats.

Contrast this with the heavy-handed government-planning policies of Europe and Japan. Those formulas have only produced economic stagnation -- and, regrettably, a kind of international class envy aimed at the United States.

Schwarzenegger lives and breathes the achievement of this nation. Later in his speech he again blasted the Kerry pessimists, stating that the U.S. economy "is moving ahead in spite of a recession [the Bush administration] inherited and despite an attack on our homeland."

Indeed, since President Bush's tax cuts of 2003, the domestic economy has increased by 5 percent and the unemployment rate has dropped to a historically low 5.4 percent. Business-payroll enrollment has climbed by 1.5 million while 2.5 million more people are working overall. (Entrepreneurs, the self-employed, independent contractors, and many other income-earning Americans are not counted in the Labor Department's payroll survey.) Filling this out, the stock market has increased 40 percent in the last year, home ownership is at a record high, wage and salary income is growing better than 4 percent, and family net worth has surpassed the level of Clinton's busted asset bubble.

Schwarzenegger gave the economy the high marks it deserves. And on foreign policy, he planted himself firmly in Bush's orb. He attacked Kerry's multilateralism (read U.N., France and Germany) as a handcuff on American national security and military operations. He said, "If you believe this country, not the United Nations, is the best hope of democracy in the world, then you are a Republican!"

Invoking Reagan's city-on-the-hill optimism, Schwarzenegger exclaimed, "We are still the lamp lighting the world, especially for those who struggle. . . . No matter in what injustice they are trapped . . . they hear our call, they see our light, and they feel the pull of our freedom."

Schwarzenegger concluded, "America is back! Back from the attack on our homeland -- back from the attack on our economy, back from the attack on our way of life. We are back because of the perseverance, character, and leadership of the 43rd president of the United States, George W. Bush. . . . Send him back to Washington for four more years!"

With this remarkable speech, Schwarzenegger becomes the post-Bush heir apparent. It may take congressional action to change the eligibility requirements for the nation's top office. But as he continues his political development, surely millions will clamor for a presidential run from the Governator.