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From National Review – Raymond J. Keating
David Malpass Runs for Senate: A candidate who gets it on the economy.

How about a senator from New York who actually understands how the economy works?

Economist David Malpass is squaring off against former Nassau County legislator Bruce Blakeman in a Republican primary, with the winner taking on U.S. senator Kirsten Gillibrand in November.

For over 20 years, I’ve been writing about and interviewing New York politicians. And it always frustrates, but never surprises, when politicians turn out to be clueless on economics.

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Malpass certainly has an impressive résumé: He was deputy assistant Treasury secretary under Pres. Ronald Reagan, deputy assistant secretary of state under Pres. George H. W. Bush, chief economist at Bear Stearns, and founder and president of an economic research and consulting firm. Many economists, it is true, forget their Economics 101 principles. But Malpass ranks as a unique political entity. Not only is he an economist running for office, a rarity, but he also gets the economics right.

In a recent interview, Malpass was on the mark in terms of economic policy. As a longtime leading expert on the federal budget and taxes, he says his current emphasis is on stopping assorted tax increases scheduled for the end of this year, and paring down the federal budget. Malpass explained: “When you raise tax rates, businesses don’t hire as many people, and that’s clearly been a problem all across New York State.”

On how to cut “out of control” spending, Malpass said, “You start today. You don’t wait for a huge solution. You just start making good decisions every day.” That process, according to Malpass, includes ending earmarks, paying for new spending by “cutting other spending,” and giving any repaid TARP money back to the taxpayers rather than “re-spending it.”

In addition, Malpass highlighted how budget scoring is rigged. The current system assumes “that there’s no negative effect on growth from higher taxes and no positive effect from lower spending. That subtly biases the system towards bigger and bigger government.”

As for Obamacare, Malpass is no fan. He favors repeal, since “it’s not improving the health-care system and it’s not well thought out.” Malpass calls for defunding Obamacare and having Congress look at health-care challenges, such as preexisting conditions, one at a time. Among his remedies are tort reform, to help rein in costly litigiousness, and such pro-consumer measures as tax-free health savings accounts.

Given the big spending increases tied to health care and other budget undertakings, Malpass worries about the threat of a value-added tax (VAT), which is gaining increased attention in our nation’s capital. A VAT is imposed on the value businesses add at each stage of production. Malpass warned that a VAT encroaches on the states’ sales-tax base; is “insidious because the consumer does not really know where her money is going”; is easy to increase; subtracts from economic growth; and hands more power to Washington. He added: “Given what Washington has done with the rest of the money we’re sending it, we’d be crazy to give them the revenues from a value-added tax.”

On the energy front, Malpass opposes efforts by congressional leaders and the White House to impose a costly cap-and-trade regulatory system. He countered: “The nation needs a much different energy policy that is oriented toward producing nuclear power, allowing drilling onshore, and that means in Alaska in a safe way. A better balance between job creation and domestic energy production on the one hand, and then safety and the environment on the other hand.”

Regarding offshore energy, Malpass emphasized that “companies need to be held accountable for environmental damages,” while policy must be set in a careful way so “efficient production of energy” is not blocked.

And what about getting the economy moving again? He highlighted the importance of small business, summing up: “For small businesses, you need less taxes, less federal spending, and you need less regulation that blocks their growth.”

The Malpass policy agenda actually aligns with sound economics. But these are not just political talking points. Malpass ranks as an economist-politician who grasps the underlying economics of public policy. That’s a refreshing change — especially in New York.

— Raymond J. Keating is a Long Island–based writer and economist.

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