Tuesday, May 24, 2011

Peter Ferrara: Newt would "restore booming, long-term, job-creating economic growth"

Conservative policy expert Peter Ferrara attended Newt's speech in front of Art Laffer's group. Laffer, who was instrumental in the Reagan administration's economic policies, said of the speech: "The combination of pro-growth tax reform, spending restraint, and sound money will restore robust economic growth with low unemployment and low inflation," notes Ferrara.

Ferrara, who "served in the White House Office of Policy Development under President Reagan," applauds the tax reforms Newt is proposing -- such as an optional 15% flat tax on personal income, a 12.5% corporate tax rate, the elimination of the capital gains tax, abolishing the death tax, and ending all forms of double taxation. "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," Ferrara writes.

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.
He continues with Newt's plan for removing job-killing regulations:
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.
On government spending, Ferrara writes:
Gingrich also called for a balanced budget, first through restoring booming economic growth that would revive surging revenues and itself reduce spending obligations. But that would also involve sharp spending reductions and money-saving reforms that were specified in detail in his 2010 book To Save America, similar to the policies adopted by the Republican Congressional majorities he led in the 1990s to balance the budget then, as discussed further below.

That would also include fundamental entitlement reforms. In To Save America, Gingrich explicitly called for each worker to have the freedom to choose personal savings, investment, and insurance accounts eventually to finance all of the Social Security and Medicare benefits now financed by the payroll tax, eventually displacing that tax entirely. He also called for sending all federal welfare programs back to the states with the same welfare block grant reforms adopted in 1996, as also discussed below. The reduction in federal spending that would ultimately result from such reforms would be unprecedented.
One of the money quotes from Ferrara: "Just as Reaganomics created a record-smashing, world-leading, 25-year economic boom, the comprehensive economic policies Gingrich advanced last Friday would in my opinion restore booming, long-term, job-creating economic growth to America.

Ferrara on Newt's record as Speaker of the House:
Gingrich's record as Speaker of the House in the 1990s provides a strong foundation of credibility for these policies. His famed budget clash with President Clinton leading to a government shutdown resulted in policies that not only balanced the budget but produced $560 billion in budget surpluses over four years from 1998 to 2001. That resulted from cutting rather than increasing tax rates, most particularly a nearly 30% cut in capital gains rates, and sharply restrained spending that allowed revenues from the growing economy to surge past spending.

Total federal discretionary spending, as well as the subcategory of non-defense discretionary spending, declined from 1995 to 1996 in actual nominal dollars. By 2000, total federal discretionary spending was still about the same as it was in 1995 in constant dollars. As a percent of GDP, federal discretionary spending was slashed by 17.5% in just four years, from 1995 to 1999. Total federal spending relative to GDP declined from 1995 to 2000 by 12.5%, a reduction in the federal government relative to the economy of about one-eighth in just five short years.

This was accomplished in part by important entitlement reforms. The New Deal era Aid to Families with Dependent Children (AFDC) program was sent back to the states with federal spending on the program limited to finite block grants for each state that remained flat in nominal terms for at least a dozen years, saving taxpayers hundreds of billions over that time from prior trends. Two-thirds of those on the program went to work as a result, and enjoyed a 25% increase in family income. Gingrich also led adoption of Freedom to Farm, which provided for a phase-out of New Deal era farm subsidies.

It was after Gingrich retired as Speaker and Bush was elected that the Republicans lost control of spending, more than reversing the Gingrich gains with a one-seventh increase in government spending relative to GDP. The Congress ditched Freedom to Farm, although the AFDC block grants survived because they were so undeniably so successful.

Gingrich successfully led a national revolution against the Democrats before, rising from the backbenches of the House to guiding a persistent Republican takeover of Congress for the first time in 70 years, continuing for a dozen years. Can he do that again?
Ferrara, back in November, also was very complimentary of Newt. My post on that can be read here.

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