Tricky path

Jeb Bush's tricky path to an economic plan

As Bush recruits an economic team, he hopes to avoid echoes of his brother and Romney.

By Ben White

One of Jeb Bush’s biggest callenges in the 2016 campaign will be to come up with a fresh economic plan that doesn’t make him seem like a tool of deep-pocketed Wall Street donors or the second coming of Mitt Romney, whose big, expensive tax cut plan failed to catch fire and left him wide open to populist attacks.

So far, however, the roster of economic advisers with Bush’s ear includes a heavy dose of Wall Street veterans and holdovers from previous GOP campaigns and the administrations of Bush’s brother and father. Bush’s advisers say it is way too early to properly assess an economic team that is only starting to take shape. And they argue that there will always be holdovers given that anyone with experience in a Republican administration these days served under a president named Bush.

But outside observers say Bush is going to need to go heavy on new blood in the coming months in order to meet some huge policy and political challenges for a candidate who is raising money in massive sums from elite Wall Street financiers and takes criticism on both the right and left for his establishment credentials. In the coming months, Bush will have to appease a conservative primary audience eager for ambitious tax relief while keeping an eye on a general electorate worried about rising inequality and the disproportionate influence of big banks.

“He has already said he wants to boost economic growth to 4 percent and he will want to be very explicit about how he plans to make sure that growth helps everyone and not just those at the top,” said James Pethokoukis, a scholar at the conservative American Enterprise Institute. “He believes the income gap is real and will have to explain what he plans to do about it.”

So far, people familiar with the matter say early members of the economic brain trust informally advising Bush are heavy on academics and policy veterans from his brother’s administration and the Romney campaign, including Columbia Business School Dean Glenn Hubbard, who helped write Romney’s tax cut plan; Kevin Warsh, a former Fed governor now at Stanford’s Hoover Institution and Robert Zoellick, a former World Bank president. AEI President Arthur Brooks is also said to speak to Bush on economic issues.

People close to Bush’s nascent campaign also say he relies on advice on fiscal policy from House Ways and Means Committee Chairman Paul Ryan, the 2012 vice presidential nominee, and Ohio Sen. Rob Portman, a former budget director for George W. Bush who is often mentioned as a possible running mate should Bush get the nomination. On budget matters, Bush is said to rely on former Florida aide Donna Arduin. Former Walmart chief executive Bill Simon is also helping put together the policy team.

One key financial-services executive in Bush’s inner circle is Goldman Sachs executive Jim Donovan, whose firm has been a strong financial backer of Bush’s campaign. Bush’s Right to Rise PAC also recently hired Justin Muzinich, a former Morgan Stanley executive close to Donovan, to oversee policy formation. Muzinich is likely to serve in a similar capacity for Bush as Lanhee Chen did for Romney, as a behind the scenes operator coming up with new policy ideas.

Bush aides note that other than Muzinich and Simon, none of these informal advisers have any official role with the former Florida governor’s political action committee and that any announcement of an economic team remains weeks, if not months, away. And there are already some new faces. Right to Rise recently hired April Ponnuru, policy director of the Conservative Reform Network, to play a senior role in policy formation.

Bush aides dismissed talk of any official roster of economic advisers as “premature speculation” this early in the cycle.
“Gov. Bush is not a candidate and has not made a final decision to move forward so it is premature to speculate on formal economic advisers for a potential campaign,” said Bush spokeswoman Kristy Campbell. “As Gov. Bush has talked about in recent months, he is committed to promoting polices that will address the opportunity gap and restore the right to rise for all Americans.”

In an interview, Portman declined to comment on any conversations he’s had with Bush. But he said he thought that whoever is GOP nominee would have to take a fresh approach on economic policy. “There is real consensus now around smart tax reform and you will likely see less of the broad-based tax cuts and more of a message that we need to reform an outdated system,” Portman said. “These are the right policies and if we change some of these fundamental structures of our economy we are going to see higher wages.”

While the Bush team insists discussion of an economic plan is premature, outside observers say the former Florida governor needs to move quickly to begin laying out a concrete framework for economic policy to avoid Romney’s fate.

Democrats moved very early in the 2012 cycle to portray Romney as a creature of Wall Street whose proposal for a 20 percent reduction in individual tax rates would benefit many of his wealthy friends. Democrats are already attempting to do the same with Bush and conservative policy thinkers and strategists say they hope the Bush team moves swiftly to counter the attacks.

“Bush and any other Republican running needs to do a better job not just in the primary but in the general election of talking about economic issues in a very different way than Republicans have in the past,” said Tony Fratto, a consultant and former George W. Bush White House official who is supportive of Jeb Bush. “If you go to Americans and ask them what their greatest fears are they won’t say it’s that their taxes are too high. They will talk about things like technology removing the need for hands-on workers and their children not receiving the skills and education to allow them to compete in a global economy.”

This is the ground that Bush hopes to fight on with economic policies that tie into his support for stronger education standards that are anathema to many conservative Republicans. Bush mostly clearly articulated this vision in broad strokes in a speech he gave in Detroit in February in which he spoke about American frustration with the slow pace of growth and paltry wage gains.

“How do we restore America’s faith in the moral promise of our great nation that any child born today can reach further than their parents?” Bush said. “This is an urgent issue: Far too many Americans live on the edge of economic ruin. And many more feel like they’re struck in place, working longer and harder, even as they’re losing ground.” Bush said in the February speech that he would offer more specifics on how to address these problem “in the coming weeks.”

Since then, the former Florida governor has spent more time on the fundraising circuit than putting out policy proposals.

Still, analysts expect him to come up with an economic plan aimed primarily at lifting up lower-income Americans.

The carried interest loophole is often cited by outside observers as one area where Bush could look to distance himself from Wall Street. Under the current tax code, private equity, venture capital and hedge fund managers often pay the capital gains rate of up to 20 percent on investment gains in their funds rather than the ordinary income rate. President Barack Obama has repeatedly pressed to tax such gains at ordinary income rates and some Republicans also support such a measure.

But even if Bush included the change in a tax plan that also lowers overall rates, it could still anger staunch anti-tax conservatives such as Grover Norquist. Bush has so far refused to sign a pledge, put out by Norquist’s group, Americans for Tax Reform, pledging not to increase taxes.

Nonetheless, making a move on carried interest could also partially inoculate Bush from the charge that he is too tied to Wall Street bankers who have helped bankroll his presidential efforts. “What I think you will see is that he is going to be able to put together an economic agenda that is going to draw on the history of conservative economic policy and his record in Florida,” said Lenny Alcivar, a GOP consultant who worked for Romney in 2012. “And it will be one that he believes will work for everyone and not pander to any particular audience.”

Bush supporters suggest that his Florida record is the best place to look for clues as to what policies the former governor will pursue. They say Bush presided over a total of $19 billion in tax relief over his tenure while cutting 13,000 state workers and growing the state’s surplus from $1 billion to $9.8 billion.

But Bush will be working with much larger numbers — and a current debt over over $18 trillion — in a national campaign. And even if Bush does decide to propose changing the taxation of carried interest, it would still not do much to pay for a tax cut plan.

Analysts expect that Bush will propose a plan that would be difficult for Democrats to assail as further exploding the deficit in order to pay for tax cuts for the rich. And in the primary process,tea party-aligned voters are generally much more concerned with deficits than they are big tax cuts.

“He’s going to have big tax reform and he is going to pay for it,” said Pethokoukis. “I highly doubt he would put forward a plan that’s going to be a big revenue loser. And there are only some ways to pay for it and scaling back deductions for wealthier Americans would be a likely candidate.”

In some ways, such a plan would be reminiscent of the one Hubbard helped design for Romney. But analysts say Bush’s would likely include more specific revenue increases and a more realistic path to deficit neutrality. Bush could even propose some kind of fee on the nation’s largest banks, something included in former House Ways and Means Committee Chairman Dave Camp’s tax reform proposal last year.

Republicans who favor supply-side economics – and Bush’s many supporters in the financial industry – would revolt at such a change. But there is much more support in the populist wing of the GOP these days for provisions that take aim at big Wall Street banks. And Bush has shown some tendencies lately to side with populists on occasion, especially in recent comments in Florida critical of the Export-Import bank, a top target for many tea party Republicans.

The current roster of Bush economic advisers is likely to generate some criticism — on the left and the right — that it is too filled with George W. Bush-era names, a criticism that plagued Jeb Bush’s rollout of a list of foreign policy advisers.

Hubbard, who did not return messages for comment, served as a top economic adviser to George W. Bush. Warsh, who did not return a call for comment, served in the Bush White House. George W. Bush also nominated Warsh to the Fed, where he served from 2006 to 2011.

And Zoellick served in multiple jobs in the administrations of both Bush presidents. In an email, Zoellick confirmed that he is advising Jeb Bush. “I do support Governor Bush and have been assisting him and his team in various ways,” Zoellick wrote. “I hope to be able to contribute, along with others, on economic as well as foreign and security policy issues.”

Democrats are also likely to criticize Bush’s reliance on Ryan, arguing that budgets put forward by the 2012 GOP vice presidential nominee slashed spending on social programs. A spokesman for Ryan said that “the chairman has talked about these issues with a number of potential candidates, including Governor Bush.”

But Portman said Bush or whoever emerges with the nomination will likely focus less on the kind of spending cuts Ryan championed in previous budgets and more on boosting export growth and reforming the tax code. “We have a terrific opportunity to talk about how our policies are going to help address the big problems out there which are weak job growth and low wages,” Portman said of the GOP message in 2016.