Diana Furchtgott-Roth: A New York financial guru runs for Senate

My friend David Malpass, candidate for U.S. Senate in New York, and head of Encima Capital, is concerned about the direction Congress and President Obama are taking the currently fragile economy.

Obama's own Office of Management and Budget — not his Republican critics — now projects that the federal budget deficit will exceed $1.4 trillion both in fiscal years 2010 and 2011.

Over the next decade, under Obama's own policies, the cumulative deficit would be $10 trillion. And the national debt in 2020 would rise from $6 trillion in 2008 to $19 trillion.

Malpass thinks this is terrible policy, since servicing that debt takes money away from business and job creation. And he thinks it's immoral, burdening our children, denying them opportunities we had in a growing America.

Many Democrats recommend raising taxes on upper-income taxpayers to shrink government deficits and rein in the national debt. Many Republicans — and some Democrats — counter that these tax increases would slow economic growth by reducing incentives to work and invest.

“When they say taxing the rich they mean taxing New York,” he told me in a telephone conversation on Wednesday. “We're a high-income state.”

David is challenging Kirsten Gillibrand, who was appointed to fill Hillary Clinton's seat. Gillibrand ran for Congress in upstate New York as a conservative Democrat. She voted against the bank bailouts. But since joining the Senate she has supported every huge spending bill the administration sought, Malpass noted, even the ones that harm New Yorkers.

On Sept. 14 Malpass faces Bruce Blakeman and Joe DioGuardi in the Republican primary. The winner will run against Gillibrand.

Until this year, New York's Senate seat was a shoo-in for the Democrats. But with New York's deep discontent over Congress' binge spending and Obamacare, David thinks that this might be the year for change.

His platform is ambitious. He wants to rejuvenate America by cutting taxes, reducing regulations, and making it easier for employers to hire. As an architect of the 1986 tax cuts, he is confident that approach works.

Four months ago, when I heard David was running for Senate, his candidacy seemed quixotic. How was he ever going to defeat a Democratic politician in New York?

Yet, over the past months, David's candidacy has gained momentum, defying all expectations.

The economy, especially employment, is an immediate problem. In light of the deteriorating fiscal situation and the financial upheaval in Europe, David's proposals are even more worthy of consideration than when he began his campaign.

According to Ethics and Public Policy Center fellow James Capretta, “The primary problem is quite plainly out-of-control federal spending. In 2008, total federal outlays were about $2.9 trillion. President Obama wants to add $1 trillion to that total in 2011, or about a 33 percent expansion of governmental activity in just three years.”

High levels of federal spending siphon economic activity from the private sector. That's one reason why Obama's projected annual unemployment rate remains above 8 percent through 2012.

David has always stood up for lower spending and taxes. Council of Economic Advisers Chairwoman Christina Romer agrees. She concludes in a new academic journal article that a tax increase of 1 percent of gross domestic product reduces output over the next three years by nearly 3 percent.

A major reason is that higher taxes have a negative effect on investment, proving David's point that lower taxes are the path to economic growth.

David is a reformer, not indebted to special interests, and willing to take on the tough job of cutting spending and lowering taxes. I hope New Yorkers will think that after decades of Democrats, it's time for a change in both ideas and representation, and send David to the U.S. Senate.

Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.

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