BEWARE DEBT RETIREMENT MYOPIA.

• Author: Kudlow, Lawrence A.
• Position: The Republican Party should consider interests of newly rich

Republicans will face a meltdown with voters unless they more energetically embrace the Reaganite message on cutting taxes and government spending that got them elected in the first place. The GOP must avoid at all cost 1998's fiscal collapse, when Congress agreed to enormous election-eve spending bills and tax cuts were scuttled altogether. Repeating those mistakes will so dispirit the conservative/pro-growth wing of the GOP that the party will risk losing everything in November, 2000--the House, Senate, and White House.

Moreover, the GOP would forfeit a once-in-a-generation political opportunity to connect with the 125,000,000-strong new investor class and the burgeoning community of nearly 100,000,000 Internet users as well as the 69,000,000 homeowners group. These people have learned from their own experience that market incentives, not government, create wealth and foster business opportunities. End-of-the-century America has become a nation of asset holders. People who own a piece of the rock think differently than those who depend on government, and they vote differently. The rise of asset ownership over the past 20 years has transformed this nation in cultural, political, and economic terms. The question is, will the GOP reach out to this group by offering pro-market policies, or will they cling to the old economy pork barrel and entitlement approach?

The economic stakes in this year's fiscal battles are huge. The upcoming budget plan will largely determine whether approximately three trillion dollars of budget surpluses over the next five years are used for growth-oriented tax cuts or further welfare state expansions.

The U.S. is in the 17th year of the Ronald Reagan-Alan Greenspan expansion. Over this period, economic growth has increased more than 80% in real terms--roughly the equivalent of adding to the U.S. economy another California, Washington, Oregon, Arizona, Oklahoma, and Texas. Policymakers need to understand why the nation has had this record long prosperity. The growth has been propelled by low tax rates; an end to inflation; victory in the Cold War; deregulation in transportation, financial services, energy, and telecommunications; expansion of free trade; and a high-tech-led productivity revolution. These policies were the essence of Reaganomics.

Over the past 17 years, the U.S. has been in recession a mere nine months. The real weighted annual gross domestic product (GDP) growth has averaged nearly 3.5% over the period. Some 10-15 trillion dollars in new wealth has been created.

Yet, year after year, most economists have wrongly predicted an end to the boom. This was particularly true in 1998, when almost all economists forecast a dramatic slowdown or a recession due to the Asian financial flu. Instead...