No Candidate Has Economic ‘Magic Bullet’
01/26/2012 11:32 am EST
The four major remaining Republican candidates have some good ideas about the economy, but none as yet have the truly revolutionary plan that will lift the US without years of pain, writes MoneyShow.com editor-at-large Howard R. Gold, who also writes for The Independent Agenda.
I’ve just returned from a couple of weeks following Republican presidential candidates—from a 200-year-old barn in New Hampshire horse country to a South Carolina barbecue joint right near the Georgia border. I’ve spoken to voters and covered two presidential debates live.
I’ll save the politics for my political blog, but I think it’s worthwhile to share the economic policies of the four remaining Republican candidates. After all, one of these people will run against President Barack Obama in November, and may become our next president.
So, I dug through my notebooks and pored over debate transcripts and candidates’ Web sites to find their specific policy ideas. I’ll give my own views later.
There’s broad consensus among the four that the government needs to get out of the way so entrepreneurs can create jobs. The GOP candidates agree that a complex tax code, burdensome regulations, and uncertainty about future government programs are keeping businesses from expanding and hiring.
- Read Howard’s analysis of why high unemployment may be permanent.
Their prescription: cut taxes, eliminate environmental and other regulations, and repeal Obamacare, the Dodd-Frank financial regulation law, and the Sarbanes-Oxley act. The less government, the better is the common theme.
No candidate embodies that philosophy more consistently than Rep. Ron Paul. Asked by CNN’s John King at the debate in Charleston, SC last week whether we need “specific federal programs to put the American people back to work,” Paul responded: “I would like to see massive reduction of regulations. I would like to see income tax reduced to near zero as possible…We have to get the government out of the way."
Paul, of course, blames the Federal Reserve for the current financial and economic crisis. The Fed, his Web site says, “is the chief culprit behind the economic crisis. Its unchecked power to create endless amounts of money out of thin air brought us the boom and bust cycle and causes one financial bubble after another.”
Paul considers the Fed unconstitutional, and he favors its abolition. He has pushed for greater transparency for years, and has demanded regular audits of the central bank. He also believes we should withdraw large numbers of US troops from overseas and cut $1 trillion a year from the budget in order to “liquidate the debt,” as he put it.
Presumably that will generate an unprecedented economic boom that will make most government programs unnecessary. Maybe so…but Paul wants a radical transformation of the system rather than specific short-term fixes.
Former House Speaker Newt Gingrich, who won South Carolina and has vaulted to the top of the polls in Florida, considers himself an idea man, although the GOP rank and file are eating up his feisty attacks on President Obama and his Republican rivals.
|Newt Gingrich (Howard Gold/The Independent Agenda)|
In New Hampshire, the former Speaker put forth a “very aggressive pro-jobs program, zero capital gains, 12.5% corporate tax rate, 100% expensing for all new equipment to dramatically modernize the system, abolish[ing] the death tax,” and adding an optional 15% flat tax.
Under Gingrich’s plan, Mitt Romney would pay virtually no taxes on his roughly $20 million annual income, the former Massachusetts governor himself pointed out.
Gingrich’s new 21st Century Contract with America, which he is unveiling on his Web site, calls for:
- turning extended unemployment insurance into a retraining program
- unleashing “America’s full energy production potential” (essentially “drill, baby, drill”)
- passing a balanced-budget amendment
- and aggressively eliminating fraud in government programs
Former Sen. Rick Santorum is the only candidate focusing principally on manufacturing, which has declined from 21% to 9% of gross domestic product.
- Read Howard’s “White Collar Recession, Blue Collar Depression.”
“We need to talk about how we’re going to put men and women in this country, who built this country, back to work…in the manufacturing sector of our economy,” he said in South Carolina. “That’s why…we need to cut the corporate tax on manufacturing down to zero."
He advocates a 17.5% corporate tax rate for non-manufacturing companies.
He also wants to cut personal income tax rates by creating only two tax brackets, 10% and 28%; tripling the child deduction; and removing all remaining marriage penalties.
Santorum also supports a balanced budget amendment, cutting spending by $5 trillion over five years, and slashing non-defense spending to 2008 levels. He says his plan would boost GDP growth to 4% to 4.5% annually and create 10 million new jobs.
Finally there’s Romney, the only candidate with extensive business experience, having built Bain Capital into an extraordinarily successful enterprise and his own fortune to as much as $250 million.
|Mitt Romney (Howard Gold/The Independent Agenda)|
In Tampa on Monday night, he summed up his approach as “the seven things that always get an economy going: get taxes competitive; regulation as modest as possible and modernized; get ourselves energy independent; open up trade with other nations and crack down on cheaters; make sure we don`t have crony capitalism; build human capital through education, and also finally balance the budget.”
Specifically, Romney would keep marginal individual tax rates at current levels, but he would eliminate taxes on interest, dividends, and capital gains for people making under $200,000 a year; end the estate tax; cut the corporate tax rate to 25% from its current 35% “as quickly as possible, and then begin a process of reshaping the entire tax code,” he said.
He also would get tougher on “unfair trade practices,” especially from China, which he would name a “currency manipulator.” Finally, he would relax visa and residency requirements for highly skilled foreign-born workers, especially those with advanced degrees.
(You can read his full economic plan here.)
My take: There are some good ideas here.
Reducing the corporate tax rate to 25% is a no-brainer, but it must be accompanied by wholesale elimination of corporate goodies and exemptions, so companies really do pay 25%.
Simplifying Dodd-Frank also makes some sense, but let’s not use that to ease oversight of big Wall Street banks, which really need it. We also should take a hard look at current federal regulations, to see which ones are getting results and which aren’t. And of course we need to get our fiscal house in order on both the spending and revenue side.
- Read about the two policies that actually would create jobs at The Independent Agenda.
But this is not the 1980s anymore, when cutting taxes and regulations helped set off an economic boom—along with sharply lower interest rates and the personal computer revolution, of course. Individual taxes are much lower now than they were then, and companies much leaner.
We also live in a globally competitive market. Lower-level manufacturing jobs have left America, and as the late Steve Jobs told President Obama, they’re not coming back.
Now, although some multinationals are bringing some high-end manufacturing jobs back here, the vast complexes employing hundreds of thousands are in Henan and Sichuan, not Detroit.
That means we Americans need to prepare ourselves and our children for a new reality. Education is everything. Government can help people get more training, but it can’t change the basic rules of global economics.
This crisis has exposed serious structural weaknesses in our economy from which it will take years to recover. There are no magic bullets on either side of the ballot. That’s what neither President Obama nor the Republican candidates will tell you as the campaign heats up in 2012.
Howard R. Gold is editor at large for MoneyShow.com and a columnist for MarketWatch. You can follow him on Twitter and read his 2012 campaign coverage at www.independentagenda.com, where he will live-blog Thursday night’s Republican debate at 8 p.m. ET.