On Paulson

Reading through the new Treasury man's speech, I am disappointed to find no tax reform as a key policy goal. There seems to be a lot of obsession with the budget deficit and long-run entitlement reform. Also, a mention of uneven income distribution.

The Bush administration ought to focus on tax reform, which is pro-growth. If they go to entitlement reform with all this silly talk about U.S. bankruptcy, it could be a big tax-hike trap as Democrats win more seats in the House and Senate. All these long-run entitlement estimates are wrong. They have low-ball growth and productivity assumption, which makes the problem look vastly worse then it really will be over the next 50 years.

Low tax-rates and an extended retirement age will solve Social Security. Betsy McCaughey believes the Medicare assumption are all wrong and are contributing to a fiscal hysteria, which is simply unnecessary.

The GOP should not lose their message of extended savings accounts, which reaches out to the investor class and will be a great wealth builder in the ownership society vision.

As for the dollar, Paulson says a strong dollar is in our nation's interest and currency values should be determined in open and competitive markets in response to underlying economic fundamentals. In other words, essentially the same message as John Snow. I was looking for something stronger. Perhaps a hard dollar to contain inflation and promote price stability.

Paulson is clearly a free trader, which is great. And he does defend lower tax rates, which is also great. But I'm worried that entitlement reform will backfire.