How the economy can be booming before next Christmas.
(Page 2 of 3)
Left of center think tanks have argued that this tax plan could not be revenue neutral without a tax increase on the middle class. But Harvard economics Professor Martin Feldstein, the founding chairman of the National Bureau of Economic Research, demonstrated in the Wall Street Journal on August 30 that there were more than enough deductions and loopholes that could be closed to make the plan revenue neutral without a tax increase on the middle class. That leaves Romney’s tax plan as involving the largest middle class tax cut overall in world history.
Not telling you their plan? That claim is just more sweeping dishonesty from Obama. The truth is that the Romney campaign has provided more detailed than the Obama campaign can handle.
Federal Spending, Deficits and Debt
Even more detailed are the views of the Romney campaign on federal spending, deficits and debt, because VP nominee Paul Ryan has already proposed two fully detailed federal budgets, which were both adopted by the full House.
That budget proposes to cut federal spending by $6.8 trillion over the next 10 years. For all the weeping and wailing and gnashing of teeth regarding that budget, all that it would do is return federal spending to its long-term, postwar historical average of 20% of GDP by 2015.
Obama’s all time record trillion dollar budget deficits would be cut by 86% after just 5 years, by 2017, as scored by CBO. And that is with old-fashioned, CBO, static scoring. With the long overdue booming economic growth generated by the Romney tax plan and other economic recovery proposals discussed below, the federal budget would most likely be entirely balanced by then.
Ryan’s budget would serve to get federal debt under control, reducing federal debt held by the public from 77 percent of GDP in 2013 to 62 percent by 2022, again as scored by CBO. That debt continues on a sharp decline thereafter, as the long-term effects of Ryan’s structural entitlement reforms phase in. Debt held by the public would be reduced to 53 percent of GDP by 2030, 38 percent by 2040, and 10 percent by 2050. That means the national debt is all but paid off by 2050, and, indeed, would be under dynamic scoring.
Of course, President Obama has his own proposed federal budgets. As I show in a forthcoming Policy Analysis from the Heartland Institute, his budget would do exactly the opposite of everything that the Ryan budget would do.
A third component of Romney’s economic plan would be to reduce regulatory costs and barriers to economic growth. That reduction would be focused on the massive overregulation erected under President Obama.
The most important component of that, among several economically critical reforms, would be the liberation of America’s energy industry. America now has the resources to be the world’s number one oil producer, the world’s number one natural gas producer, the world’s number one coal producer, and the world’s number one nuclear power producer. Under Romney’s energy plan, that is quite likely.
Romney would in particular retire the EPA’s administrative implementation of the cap and trade tax in the name of the global warming fantasy, without congressional approval. (Note: Before there can be global warming, the world has to be warming.) He would also terminate the EPA’s jihad against the coal industry. He would restore the permit process for nuclear power plants, and would not threaten the natural gas boom that has cratered natural gas prices for consumers with regulations against the fracking breakthrough.
He would also reverse the Dodd-Frank hyper-regulation, with hundreds of new regulatory mandates still in the pipeline, threatening the business and consumer credit essential to economic recovery, and the extinction of hundreds of small banks and financial institutions.
Of course, he would also reverse the Obamacare regulatory takeover of health care, terminating both the individual mandate and the employer mandate. These regulatory reforms would slash unnecessary costs holding down investment and job growth, and liberate the private sector to produce jobs again.
Strong Dollar Monetary Reform
The Fed’s monetary policy has gone completely haywire. The Fed is now buying 77% of all the bonds sold to finance Obama’s all-time record trillion dollar plus deficits. It has maintained negative real interest rates for years now, when that same policy was a central cause of the financial crisis. See, John B. Taylor, Getting Off Track (Palo Alto: The Hoover Institution, 2010). The Fed’s balance sheet of asset holdings has tripled, while bank reserve balances have increased by 200 times during Obama’s term.
All that monetary tinder is now out there waiting to be set aflame, to burst into the double digit inflation of the 1970s, if not worse. Fed Chairman Ben Bernanke says not to worry, he will withdraw all that excess money before it explodes into inflation. But doing so will be contractionary, sending interest rates soaring, and throwing the economy back into recession. With $16 trillion in national debt and more, a contractionary approach will explode federal spending, deficits, and debt. But ultimately the Fed will have no choice but to take that course, or completely trash the dollar with runaway inflation.
Consequently, the Fed has already laid the foundation for the return of double-digit inflation, and for the next recession, before we have even recovered from the last one. Perpetually rising gold is only signaling the ultimate collapse of the dollar. If that happens, with all of our experience since the 1970s, it should be considered treason.