Money & Politics

Published: Monday, 26 Oct 2009 | 3:37 PM ET

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CNBC.com Capital Money

Here’s a question: If unemployment is the problem, then why aren’t supply-side tax cuts, along with tougher government budgetary restraints, a possible solution?

Top Obama economic advisor Christy Romer delivered a very gloomy forecast to Congress late last week.

She said that unemployment will remain at a “severely elevated level” and that the U.S. jobs market will stay painfully weak next year.

She was just being honest. Romer even said the Obama stimulus plan will not contribute much to economic growth next year.

So the administration is searching for a jobs-recovery plan, just like the rest of the country.

Meanwhile, big-government spending and temporary tax credits have not worked, by the administration’s own admission. That’s basically what Ms. Romer was saying.

So why not try something different?

Why not go for lower tax rates across-the-board on individuals, businesses, and investors? Why not go for permanent tax cuts that will create new growth incentives? To paraphrase economist Art Laffer, if it pays more, after tax, to work, produce, and invest, folks will work, produce, and invest more. It’s worked in the past. And I believe it will work again.

Incidentally, this idea of cutting spending and cutting tax rates is attracting a lot of attention in many of the key state races right now — like the governor’s race in New Jersey, where unemployment is also hovering around 10 percent. The idea is also looming large in Virginia, as well as in some of the early skirmishing in California.

If it’s happening in the states, when will Washington finally get the message?

Watching Your Money

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