This isn’t just campaign rhetoric.
Last Friday I attended the speech by Newt Gingrich at Art Laffer’s annual Investor Conference in Washington, D.C., where Gingrich unveiled his own economic recovery program. This wasn’t just campaign rhetoric. The speech was specific, detailed, and comprehensive.
Laffer himself, who was central to defining the economic policies that produced the 25-year Reagan economic boom, said regarding Gingrich’s economic plan, “The combination of pro-growth tax reform, spending restraint, and sound money will restore robust economic growth with low unemployment and low inflation.” Moreover, Laffer added, given the dramatic reductions in tax rates as discussed below, “in due course, the plan should be surprisingly inexpensive from the standpoint of lost revenues given the powerful effect it will have on the future growth path of the United States economy.”
The Coming Crash of 2013
President Obama has gotten away so thoroughly with driving the narrative and defining the debate that too many have overlooked what he has already set in store for the American economy in 2013. Already scheduled in current law for that year is the expiration of the 2001 and 2003 tax cuts, which Mr. Obama has refused to renew for single workers making over $200,000 a year, and couples making over $250,000, disparaging them as “millionaires and billionaires.” Also scheduled to go into effect in 2013 under current law are all the tax increases of Obamacare. Together, these job killing tax policies would result in a sharp increase in the tax rates on the nation’s small businesses, job creators, and investors for virtually every major federal tax.
The top income tax rate would increase by nearly 20%, counting the slashed income tax deductions Mr. Obama already proposed in his February budget. The capital gains tax rate would increase by nearly 60%, counting the new Obamacare taxes on investment income. The total tax rate on corporate dividends would increase by three times altogether. The Medicare payroll tax rate would also increase by 62% for these taxpayers. The death tax would rise from the grave with its original 55% top rate.
Unless reversed, these economic policies threaten to be the coming crash of 2013. That is why Gingrich first proposes repealing all of these tax increases, including Obamacare in its entirety.
But to produce robust economic growth, he proposes to go well beyond that. He proposes to abolish the capital gains tax altogether, which is just an additional layer of taxation on capital income, in addition to the individual income tax, the corporate income tax, and the death tax. That is why fourteen out of thirty OECD countries, plus China, Taiwan, Hong Kong, Singapore and others, already enjoy zero capital gains taxes.
Gingrich proposed as well corporate tax reform that would reduce the federal corporate tax rate to 12.5%. America today suffers from virtually the highest corporate tax rate in the industrialized world, with a federal rate of 35%, and the states pushing it to close to 40% on average. Yet, much of the rest of the world, ironically, has learned the lessons of Reaganomics. The average corporate tax rate in the European Union has been slashed from 38% in 1996 to 24% today. Canada’s rate has been cut to 16%, scheduled to decline to 15% next year, with the ruling Conservative Party recently rewarded with a strong majority of its own in new elections. Lower corporate tax rates prevail among our major competitors in Germany, China and India as well. With a corporate tax rate of 12.5% first adopted in 1988, Ireland enjoyed a soaring increase in per capita income from the second lowest in the EU to the second highest. Our own Treasury Department published a study showing that Ireland raises more corporate tax revenue as a percent of GDP with that 12.5% rate than we do with our much higher rate. How are American companies supposed to compete in the global marketplace with such a disadvantage?
Gingrich’s plan also provides for 100% expensing of investment in new equipment so American workers can work with the most technologically advanced tools in the most advanced factories in the world. Gingrich proposes as well to end permanently the death tax and its double taxation of the lifetime savings of Americans.
Finally, Gingrich proposes an optional flat tax of 15%. That means that taxpayers would be free to choose to file their taxes under the current system with all of its complexity, or the new reformed alternative system, where their taxes could be filed on a postcard, saving hundreds of billions in unnecessary costs each year.
But the Gingrich plan goes beyond tax policy. He would reverse the fundamental Bush blunder of a cheap dollar policy, which pumped up the housing bubble with loose monetary policy. That blunder has been multiplied many times over under Obama, just as Obama has done with everything that Bush did wrong. Gingrich proposes instead to return to the Reagan-era, stable dollar monetary policies that halted the runaway inflation of the 1970s, never to be heard from again, until recently. He also proposes fundamental Fed reform to provide for transparency of all Fed activities, and permanently end bailout abuses.
Another major component of the plan is deregulation. Gingrich proposes to outright repeal Sarbanes-Oxley, which only adds unnecessary costs that have deterred job-creating investment in the United States and undermined the international competitiveness of America’s financial industry. He proposes to repeal as well the Community Reinvestment Act, which was abused to help cause the financial crisis. He called as well for breaking up Fannie Mae and Freddie Mac, and moving their smaller successors off government guarantees and into the free market.
Underlining his opposition to any cap and trade policies, Gingrich proposed to replace the Environmental Protection Agency with an Environmental Solutions Agency. That is to achieve a fundamental change in environmental policies from anti-growth confrontation with industry to collaboration with job creators to achieve better overall results. He also proposes to modernize the Food and Drug Administration, recognizing the need to get lifesaving medicines and technologies to patients faster, and to remove cost barriers to their rapid development.
Deregulation is also central to the American energy policy Gingrich also advocated. Even at the height of Obamamania in the summer and fall of 2008, Gingrich’s “Drill Here, Drill Now, Pay Less” campaign was instrumental in leading then President Bush to rescind the Executive Order banning offshore drilling, and Congress to let the statutory offshore drilling ban expire. Gingrich last Friday called for freeing the energy industry to maximize production of all forms of American energy, from oil to natural gas to clean coal to nuclear power to all forms of alternative fuels. That would assure the reliable supply of low cost energy essential to fueling a booming economy.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?