Category Archives: pro-growth tax reform

Is inequality Holding Back the Recovery?

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The Nobel prize-winning Keynesian economist, Joseph Stiglitz, claims in the January 20, 2013 New York Times, that “Inequality is holding back the recovery”.  He says that the most important reason is because the middle class is too weak to support the consumer spending we need.  And that the weakness of the middle class is holding back tax receipts.  And that we are squandering our young who are increasingly unable to get an education without borrowing huge sums of money.

Many liberals deplore the slow rate of economic growth since the recession ended in June 2009 and all of the problems it creates and exacerbates such as high unemployment and lower tax revenue to support public services.  What these liberals amazingly fail to understand is that there are tried and true methods to promote economic growth.  What we need to do is to lower tax rates (offset by eliminating tax deductions and loopholes), remove or diminish the enormous new regulatory burdens which have recently been placed on the economy, boost domestic energy production and aggressively, rather than halfheartedly, pursue new trade agreements to lower the barriers to free trade.

Powerful trends such as globalization and computer technology are driving economic progress and causing the inequality which Stiglitz and many others deplore.  We need to embrace these trends and use them to our advantage.  The way to boost the middle class is to boost our stagnant economy in the tried and true ways which have worked in the past.  The way to boost postsecondary education is to recognize that there are many high quality and low cost schools all over the country.  And that it is not necessary to borrow lots of money to get a good education. 

In short, the solution to the urgent and critical economic and fiscal problems we are now facing lies entirely under our control.  All we need are national leaders who have the vision, capability and fortitude to lead the way.

One Cheer for Lee Terry

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Congress has averted the immediate Fiscal Cliff but no significant action was taken to address our long term fiscal problems.  According to the Wall Street Journal, the deficit will shrink slightly below $1 trillion for a few years and then continue its inexorable rise. The can was kicked down the road for two months by delaying sequestration until March 1.  In other words this was a bad deal and Republicans in the House of Representatives should have voted it down and held out for a much better deal.

At least, Nebraska’s 2nd District Congressman, Lee Terry, voted against it.  Speaker John Boehner declared that the new 113th Congress would make the federal debt and deficit its singular focus.  Let’s hope that Mr. Boehner means what he says and that Mr. Terry supports him when the chips are down.

One year ago Mr. Terry voted to extend the payroll tax holiday for two months (annual cost $110 billion) and then voted against a full year extension two months later, after the die was cast.  Shenanigan’s like this are unacceptable and should be interpreted as complacency and deviousness about addressing serious problems.

House Republicans are in an incredibly difficult position.  We’ve just re-elected a President whose basic economic policy is more artificial stimulus (government spending), which just makes the deficit and debt that much worse.  The Republican House is now the sole bastion of common sense economic and fiscal policy.  We have to hold their feet to the fire.  Our survival as a strong nation depends on it.

Is Growth Over?

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                                             Is Growth Over?

In a recent New York Times op-ed column, Is Growth Over?, the Keynesian economist Paul Krugman argues that our current information technology revolution may not be potent enough to increase our economic growth rate beyond the American historical average of about 2%.

As much as we hope for a faster rate of growth, let’s assume that he is correct.  In fact our average rate of growth for 2010 – 2012 (since the recession ended in June 2009) is 2.1%.  What are the economic implications of 2% growth indefinitely into the future?  They are slower job growth, higher unemployment and therefore lower tax revenue.

High unemployment is bad enough for the millions of unemployed and underemployed.  But the fiscal implications are much worse because they affect the entire country.  We’ve already had four years in a row of trillion dollar deficits and the 2013 budget projections don’t look any better.  So continuing our present course presents a grim outlook, to say the least.

What are the alternatives?  We have two choices.  One is to boost the private sector with measures like pro-growth tax reform, relaxing onerous regulations, boosting domestic energy production and promoting international trade.  If such pro-growth policies are not politically doable, then the alternative is massive tax increases and spending cuts.

Our first priority must be to rapidly shrink the federal deficit down to zero.  Otherwise we are inviting fiscal calamity which can hit at any time without warning.  Fiscal conservatives should always remain focused on this #1 problem.  If no agreement can be reached for a rational plan to significantly reduce the deficit, then get the job done anyway that is possible.

We have got to wake up the American people to our urgent fiscal condition.  If going over the cliff is what it takes, then so be it!

No Deal is better than a Bad Deal

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It is beginning to look like President Obama and House Speaker Boehner may not be able to negotiate an acceptable deal by December 31st to avoid going over the Fiscal Cliff.  The President wants tax rates to rise for incomes above $400,000.  The Speaker has offered to raise tax rates for incomes over $1,000,000 but it is not clear if House Republicans will go along with this, even if accepted by the President.

What is the effect of such increases in tax rates?  According to the Wall Street Journal, raising taxes for incomes over $500,000 would affect 750,000 small business owners, while an income cutoff of $1,000,000 would affect 311,000 small business owners.

What will be the economic impact of restoring Clinton era tax rates on small business owners?  A recent study by Ernst & Young predicts that employment would fall by 710,000 jobs and that economic output (GDP) would decrease by 1.3% on an annual basis.

Conclusion:  although more tax revenue is needed, as well as significant spending cuts, to get our fiscal house in order, it matters where this new revenue comes from.  What we really need is pro-growth tax reform.  This means lowering marginal tax rates and curtailing deductions and loopholes.

Yes, it is preferable to avoid going over the fiscal cliff.  But a deal needs to be structured which puts us on a sound fiscal and economic track for the long term.  Principle matters.  No deal is better than a bad deal.

A Minimum Tax for the Wealthy?

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Warren Buffett has proposed a minimum tax for the wealthy in the November 26, 2012 edition of the New York Times. It is reprinted in the Omaha World Herald on November 28, 2012. The proposal is for a minimum tax of at least 30% on all income over $1 million.

Mr. Buffett’s proposal is amazingly similar to Mitt Romney’s tax proposal during the campaign. Mr Romney’s plan is cut everyone’s tax by 20% starting from the Bush tax rates which top out at 35%. This means that Romney’s top rate would be 28% and he would limit deductions to an absolute dollar maximum of $25,000 or so. A very high income person would pay 30% according to Buffett and very close to 28% according to Romney. The difference between 30% and 28% is minor! Shall we compromise at 29%?

Mr. Buffett’s purpose is to make the tax code more equitable and Mr. Romney’s purpose is to stimulate the economy with lower rates. It sounds like we may be able to accomplish both goals at the same time! Growing the economy, and thereby increasing tax revenue, is essential to drastically shrink deficit spending in order to stabilize the national debt. Growing the economy is also the best way, the quickest way, to create more jobs and lower the unemployment rate.

With the Buffett and Romney tax proposals so similar, perhaps Congress and the President can agree on a plan for pro-growth tax reform. This will be a big step in the right direction. In fact it is half the battle to solving our economic and fiscal problems. The other half, of course, is to make spending cuts. Progress in this area will be far more difficult and contentious but just as important, if not more important, than tax reform. The (Republican) House of Representatives will have to show a lot of leadership to make progress in this direction.

One way to cut spending

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The fiscal cliff is looming, the national debt is exploding and the economy is stagnant.  So what can and should Congress do to prove that it is serious about our urgent economic and fiscal problems?  Simply extending all of the Bush tax cuts and repealing sequestration amounts to kicking the can further down the road and is not a serious option.  Of course we need pro-growth tax reform, i.e. a major overhaul of our tax code to both simultaneously lower tax rates and curtail tax deductions.  But this is a big project and will take some time to be sorted out by Congress.

What can Congress do quickly, in a matter of weeks rather than months, to get the ball rolling?  The organization, Taxpayers for Common Sense, has recently provided a useful answer.  The report, Sliding Past Sequestration, proposes a plan to cut $2 trillion from the federal budget over the next ten years, or roughly $200 billion per year.  This is an example of a serious budget reform program of the sort Congress should initiate to begin to whittle down deficit spending of over $1 trillion per year.  In this proposal cuts are made in many different federal departments, including Agriculture, Energy, Interior, National Security, Transportation, and also Tax Expenditures.

Check out these possible budget cuts.  More than likely you will approve of some of them and find others to be less appealing.  Note that entitlement cuts such as for Medicare, Medicaid and Social Security are not included in this report.  Nor are cuts in education programs or social programs for low income people such as food stamps and housing assistance, for example.  Of course, adjustments in entitlement programs and social programs will also have to be made sooner rather than later.

For Congress to take the initiative to begin making big cuts in the federal budget will have a very positive impact on its public image.  There will be vociferous complaints from those affected by the spending cuts.  But this will demonstrate that the cuts are serious and will help Congress recover the credibility which is now so severely lacking.

Solving our economic and fiscal problems

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“The Election winners must choose between fiscal calamity and compromise” said Robert Bixby, Executive Director of the Concord Coalition, in a blog post yesterday.  “There must be spending cuts, including reform of our major entitlement programs such as Medicare, Medicaid and Social Security.  And there must be tax reform that broadens the base, maintains progressivity and increases revenues.  And all of this must be, and indeed can be, done in a way that enhances economic growth.”

This is an excellent statement of our country’s dire fiscal condition at the present time, put very clearly but in a nonpartisan and non-confrontational way.  It is critical that our national leaders, all of them and from both political parties, focus their full attention and efforts, on solving this problem.  As a highly interested local office holder in Omaha NE, I will be using this blog format to state in a direct and unequivocal manner what action Congress and the President should take in the days ahead to put our nation on a sound and sustainable economic and fiscal track.

Our immediate goal must be to stabilize (i.e. stop adding to) the national debt and this means quickly shrinking the size of our annual deficit until it either disappears entirely, or is at least greatly reduced.

First of all, we need to do a better job of growing the economy.  This will not only put more people back to work, but will also raise additional tax revenue, which will shrink the deficit.  In the meantime, while we’re working harder to stimulate the economy and make it grow, we also need to get started on making huge spending cuts in our national budget.  Let’s cut from programs across the board, especially including entitlements.  This is not only the fairest and most nonpartisan way to attack the problem but will also achieve the biggest overall spending cuts.

In the weeks ahead I will be as specific as I can possibly be on where spending cuts can be made.  I will also try to stay locally focused.  In other words, I will be paying close attention to the Nebraska congressional delegation and what our own representatives are doing on tax and budget matters.  Please consider contributing your own ideas to this forum so that we can work together to effectively address our country’s urgent fiscal problems!

My purpose in creating this site

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I am so concerned about the federal deficit and the rapidly increasing national debt that I entered the recent Republican Primary for Nebraska’s Second Congressional District. The Primary was held on May 15, 2012 and the incumbent, Lee Terry, was re-nominated.  Mr. Terry went on to win re-election to an eighth term on November 6.

My platform was (and still is) to completely eliminate the deficit. I describe myself as a non-ideological fiscal conservative. By this I mean that I am highly focused on fiscal issues with no particular axe to grind besides cutting spending and increasing revenue through tax reform and economic stimulus.  Even though Presidents George W Bush and Barack Obama are primarily responsible for our huge deficits in recent years, it is Congress which enables presidents to spend money and therefore Congress bears much responsibility as well. My attitude is that any member of Congress who is not actively and clearly providing leadership in cutting spending also bears responsibility for our huge deficits.

At this point, having spent so much time and effort in the political process, I am still highly committed in a personal and emotional sense to addressing this issue. This website will be used by me to continue raising awareness on the very same issues about which I recently campaigned as an active candidate.