To Save America: Stopping Obama's Secular-Socialist Machine (21 page)

The federal deficit last year clocked in at a record $1.4 trillion. That was an astounding 13 percent of GDP, one-eighth of the entire economy, and this year the deficit is expected to be even higher. In comparison, the deficit in the last budget adopted when Congress had Republican majorities was $162 billion, about one-tenth as high as today. Even the deficit for the big-spending final year of Bush’s presidency, pumped up by two years of Democrat congressional majorities, was a third of Obama’s 2009 deficit, or $458.6 billion.

The core problem, of course, is President Obama’s runaway federal spending, which exploded from $3 trillion in 2008 to $4 trillion in 2009, a shocking increase of 33 percent in one year. Obama’s budget busters include increasing federal welfare spending by one-third in just his first two years, with total welfare spending soaring to $1 trillion by 2014 and $10.3 trillion over the next ten years.

Along with that increased spending come higher taxes. Counting the tax hikes for 2011 in the Obama budget, the tax increases in the healthcare takeover, and state income taxes, the average top income tax rate in America will climb to about 52 percent. Our top rate would then be higher than in France, Germany, and Canada. In five Democratic-dominated states—California, New York, New Jersey, Hawaii, and Oregon—the total top tax rate would be higher than in
socialist Sweden!

And this has not yet accounted for further tax hikes proposed by either Obama or his Democratic congressional allies. These range from crippling energy taxes (which advocates call “cap and trade”)
to a European-style value-added tax (VAT). Both these measures would violate Obama’s campaign pledge not to raise any taxes on anyone making less than $250,000 a year. Then again, Obama already broke that promise when he raised cigarette taxes.

Obama’s high-tax, high-spending approach along with the Fed’s easy money, cheap-dollar policies have weakened the dollar so severely that foreign powers are now openly discussing replacing the dollar as the world’s currency. If that happens, Americans will endure the expense of having to buy another currency in order to buy foreign oil or anything else from overseas. Under those conditions, any further weakness in the dollar will impose even higher costs on us.

These are policies for long-term economic stagnation, and perhaps another, even deeper, recession. If they are not completely replaced with pro-growth alternatives, we will suffer less opportunity, less upward mobility, and a long-term decline in America’s standard of living—in other words, the end of the American Dream.

We need a new economic policy to promote a robust economic recovery and a new, long-term economic boom. This requires sweeping change.

First, we should cut corporate taxes. America suffers from the second highest business tax rate in the industrialized world, with a federal rate of 35 percent, and states pushing it close to 40 percent. 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 percent in 1996 to 24 percent today. Ireland has a corporate tax rate of 12.5 percent, which has caused per capita income to soar from the second lowest in the EU twenty years ago to the second highest today. Our own Treasury Department has said Ireland raises more corporate tax revenue as a
percentage of GDP than we do with our much higher rates. Corporate tax rates in India and China, our emerging competitors, are lower as well. We should restore America’s competitiveness in the world by reducing the federal business tax rate to match Ireland’s rate of 12.5 percent.

Second, rather than increase capital gains tax rates by 66 percent as Democrats propose, we should match China’s pro-jobs policies and abolish capital gains taxes altogether, both for individuals and corporations. By effectively double-taxing capital income, the capital gains levy discourages the venture capital that feeds start-ups and creates jobs. That is why fourteen out of thirty OECD countries, plus China, Taiwan, Hong Kong, Singapore, and others, already enjoy zero capital gains taxes.

With these two measures alone, America would become the most desirable country in the world in which to invest and start a business. That means new jobs and new prosperity.

Third, to alleviate the unemployment crisis, we should cut federal payroll taxes by 50 percent for two years, providing powerful, immediate relief to small businesses that create the most jobs. Follow this with a permanent personal account option for that portion of payroll taxes for younger workers, with the personal accounts substituting for an equivalent portion of future retirement benefits. Given historical capital market returns, workers would get much higher benefits than Social Security promises, let alone what it will actually be able to pay in the future. Workers holding these personal accounts should get a guarantee to get at least as much as Social Security promises today. This would provide a continuing gusher of new savings for capital investment, resulting in more jobs and higher wages.

Fourth, instead of reinstating the death tax with a 45 percent rate, as Obama and the Democrats want, we can create hundreds of thousands of new jobs by abolishing the death tax altogether. Taxpayers have already paid considerable taxes on any money saved over their
lifetime. Taxing it again at death is abusive and unfair. No one should be required to go to the undertaker and the IRS in the same week. And no one should see their lifetime of hard work, prudent spending, and careful saving confiscated by the government and given to others.

Fifth, we should provide for immediate expensing for 100 percent of new equipment purchases by businesses, stimulating investment in new, productive technologies. Allowing businesses to write off their productive investments in one year will lead to massive investment in new machinery and new technology. It will ensure that American workers have the most modern and productive equipment in the world. It will also lead to a new birth of American manufacturing for machine tools and other expensable items.

Sixth, repudiating the regressive energy tax policies of Obama and the Democrats, we should implement the American Energy Plan discussed in chapter eighteen, which would unleash the private sector to produce low-cost, reliable energy supplies from American sources. This would create millions of new jobs and generate billions in new revenues for federal and state governments.

Seventh, we should repeal the disastrous mark-to-market accounting regulations and replace Sarbanes-Oxley with reasonable accounting requirements. We should also repeal the Community Reinvestment Act that contributed to the financial crisis. While we’re at it, let’s break up Fannie Mae and Freddie Mac and move their smaller successors off government guarantees and into the free market.

Eighth, we need to adopt Reagan-style strong-dollar monetary policies, guaranteeing the dollar remains the world’s reserve currency, ensuring lower interest rates and more long-term capital investment, and averting any resurgence of inflation.

Ninth, analogous to the Reagan budget cuts of 1981, we should immediately cut federal spending by $180 billion. We should then
adopt a budget that cuts future federal spending by $1 trillion, as we did in the House in 1995. Terminating TARP and all bailouts and repealing all unspent stimulus funding would be a good start. With these measures and a resultant booming economy, we can and should balance the budget within seven years. We should then make that policy permanent with a balanced budget amendment to the Constitution.

This comprehensive plan would cut unemployment to 3-4 percent and restore long-term economic growth. But we can do more. To generate another lasting economic boom, we need fundamental tax reform, similar to that proposed by Steve Forbes. We should adopt the optional 15 percent flat tax with generous personal exemptions of $12,000 per person. For a family of four, the first $48,000 in income would be tax free. Workers could stick with the current tax code if they prefer, but the new system would allow them to file with just a post-card. We could begin this transformation by cutting the current 25 percent income tax rate paid by the middle class to 15 percent, leaving 90 percent of workers effectively with a flat tax of 15 percent or less.

Finally, we should adopt the entitlement overhaul discussed in chapter fourteen. Personal accounts would be expanded over time to pay for all the benefits now financed by the payroll tax, allowing us to abolish that tax completely. Fundamental welfare reform based on work would be the single most effective contribution to eliminating poverty in America.

These reforms are not particularly complex, and they won’t require thousand-plus page bills to be rammed through Congress. They are common-sense solutions that replicate policies that have worked, both in America and abroad, and that reject those that have failed.

Just as Reagan ushered in a 25-year economic boom, with the right policies we could launch a new boom lasting till 2035 and beyond.

With Dan Varroney, COO of American Solutions

 

 

 

S
mall business is the engine of job growth, creating three out of every four new jobs. And many of the remaining jobs are created by companies that began as small start-ups. So if you want to expand the economy and create jobs, you have to focus on small business.

American prosperity is the cumulative result of the creativity, courage, and leadership of individual men and women. In business, science, and the military, the relentless pursuit of innovative achievement has been the driving force of our success. This is the value of entrepreneurship. It is the spark of energy and purpose that leads individuals to create and manufacture something new and productive. It breaks through barriers, challenges the status quo, and draws upon the strengths of others to achieve results. It is the will to work hard, coupled with the intelligence to work smart. Fundamentally,
entrepreneurship is the audacity, perseverance, and competence that turn an individual into a creator, whether of wealth, science, technology, or military success.

Throughout our history, Americans have found innovative and even revolutionary methods to accomplish what people thought was impossible. Benjamin Franklin harnessed the power of lightning. Samuel Morse’s telegraph and Alexander Graham Bell’s telephone allowed us to communicate across great distances. Henry Ford developed uniform car parts and from that created the assembly line, ushering in the system of mass production that would define twentieth-century America. Defying gravity, the Wright Brothers introduced manned flight. Charles Lindbergh extended this know-how to fly across the Atlantic Ocean, and NASA’s Mercury and Apollo programs later took man into space. J. Robert Oppenheimer and the Manhattan Project unlocked nuclear power, a source of energy several orders of magnitude beyond any that had ever been conceived.

Government at every level can encourage thriving new businesses and job growth with low government costs, minimal regulation, low tax rates, solid education systems, and fair, predictable laws.

But government itself cannot create sustainable jobs.

The 2008 recession brought double digit unemployment, shut down businesses and factories, and put millions of Americans out of work. To overcome this adversity and spark long-term job creation, we need to focus on entrepreneurship, small jobs, innovation, and removing government obstacles to growth.

The floundering command and control approach of the Obama administration and Congress is proving once again that government doesn’t create jobs. Introducing new taxes and regulations destroys jobs and restricts innovation. With unemployment hovering near 10 percent, we must change direction and position the United States to be the industrial powerhouse it can and should be.

When it comes to job creation, we know what works and what doesn’t. As the Small Business & Entrepreneurship Council’s “Small Business Survival Index 2009” puts it,

State-by-state economic records of the past decade show us conclusively that low taxes create jobs and high taxes kill them.

For example, in 2003 North Dakota governor John Hoeven III encouraged the state legislature to overhaul the state’s corporate income tax, reducing the top rate from 10.5 percent to 7 percent and providing a two-year tax exemption to encourage natural gas drilling. Now the state’s economy is booming, boasting the lowest jobless rate in America—around 4 percent.

Consequently, S&P Rating Services upgraded the state’s credit rating from AA to AA 1 in 2009. That lowered the interest rate on
North Dakota’s state debt, which in turn lowered the tax burden on the state’s residents. With the economy growing quickly and government spending remaining frugal, the state began considering a big tax cut that would boost the economy even more. As Reuters reported in March 2009,