Opposing bloggers often respond to my attacks on this Administration's policies by alleging that I complain all of the time without offering any of my own solutions. I disagree, but, in order to lay to rest those inane accusations, I am going to propose solutions to turn the economy around and create jobs. I'll start by making a number of assumptions: 1) growing the economy is what creates jobs. A strong economy means that there is stability in the markets and an anticipation of greater future profits. If there is an anticipation of greater profits, then investors and job creators know that they will have sufficient capital in the future to cover the cost of hiring new employees; 2) government is not the solution. Instead of creating a multiplier effect, every dollar spent in the public sector is a dollar taken out of the private sector where it can be used by the private sector, whose sole goal is the creation and massing of wealth, and, instead, spent based on political expediency, i.e. that money is given to someone who is a member of a favored special interest group. The net effect of public spending is at best zero and, usually, after deducting administrative costs, a net negativ; and 3) as Hazlitt teaches us, any good policy lifts all boats and considers the long-term consequences.
Idea #1 - END THE CORPORATE INCOME TAX
Eliminate the corporate income tax. Shareholders are taxed on their income. Those same shareholders own shares in companies whose taxable income is taxed again at the 35% corporate tax rate. That's double taxation. Elimating that double taxation will free up more capital for expanding businesses and creating jobs.
Item #2 - REFORM THE TAX SYSTEM
Many conservatives recommend making the Bush tax cuts permanent. They're right in principal, yet tax cuts only have a positive effect on the economy if they last long enough for entrepeneurs and investors to make long-term decisions based on them. However, a paltry 3% reduction is not enough to stimulate a stagnant economy. Instead, we should implement a flat tax so that everyone has skin in the game. People who don't pay taxes and receive their incomes from the government, have few qualms about spending other people's money. If they know that they will have to contribute an equal percentage to the pot, then they will be less likely to elect representatives whose sole intent is to tax and spend.
I'm not sure what that percentage rate should be. However, if government revenues as a percentage of GDP average 18% per year, then that would be a good starting point. We should ask for a little more than we know that we need, in the event there are some unforeseen costs, so let's set the rate at an even 20%. That should make our tax returns easier to prepare.
Next, we eliminate every tax credit and every deduction, including the sacred mortgage interest credit and the child tax credit. If you make $100,000 in income, then you pay $20,000 in taxes. If you make $10,000 in income, then you pay $2,000 in taxes. Businesses do not get a deduction for expenses or depreciation because we have eliminated the corporate income tax which allows them to keep more of their income. We also have lowered the top individual tax rates anywhere from 8%-16%.
ITEM #3 - CUT SPENDING DRAMATICALLY
Eliminate the following federal agencies: the Commerce Department, the Education Department, the Department of Energy, and the Department of Housing and Urban Development. Cut the budgets of all remaining agencies and departments by 10%. Let the agency and department heads, who are closer to where the rubber hits the road, choose what programs are to fall under the knife.
End all federal farm and energy subsidies and all corporate welfare.
End the federal gasoline tax.
Eliminate the Federal Reserve (I already took out Fannie and Freddie when I axed HUD). Since its inception, it has done nothing but create inflation and exacerbate business cycles, while, through its printing press, it enables politicians to start unconstitutional wars and fund their favorite government pet projects.
End all funding to the UN and NATO. The UN has not been our friend since the early 1950s, even though we have funded over 2/3 of its operations. Without the threat of the Soviet Union, are European allies can defend themselves at their own cost.
Reduce our military presence abroad. Not only should we get out of "foreign entanglements" in the form of multinational organizations, we should also close all of our bases in Europe and South America. It goes without saying that we need to withdraw our troops from Afghanistan.
ITEM #4 REMOVE ALL PROTECTIVE TARIFFS/END EMBARGOES
We live in a global economy. With our advancing levels of technology, we are able to transmit information, including prices, instantly across the globe. Our economy needs to be able to modernize and compete in a global market. When we impose protective tariffs, we disincentivize that growth and will trigger retaliatory tariffs, resulting in increased prices for all and greater difficulty for domestic firms to sell their own products abroad.
I detest trade embargoes and it's not because I don't get the point. Cubans are communists and we don't like that. Iranians want to kill us and we don't like that either. However, embargoes only hurt the citizens of that country. The government and the wealthy elite are going to get what they want, regardless of what we do. And disabuse yourself of the idea that they lead to popular revolution and the toppling of despots. There are no instances in which embargoes have led to such upheavals.
It's time for a different strategy. The 2 things that the United States has most going for it, more than any other nation, are its freedoms and its wealth. Why not trade freely with those countries and let them witness firsthand the benefits of a free market. Let them listen to US music, read our books, visit our websites, and taste of our liberty. Communism and despotism don't stand a chance. The added benefit is that we open up new markets for American products and services.
