By Newt Gingrich
Officially, the recession ended two and a half years ago. President Obama tells us the economy has been moving in the right direction since June 2009.
Few will take solace in that statistic. Americans are suffering. For nearly three years, nearly one in 10 have been out of work. Almost double that number are either underemployed--working part time when they would rather be full time--or have simply given up looking.
Historically in America, the deeper the recession, the stronger the recovery. By historical standards, we should be completing the second year of a booming recovery. Recall that, just like President Obama, President Reagan inherited a terrible economy when he took office. But Reagan enacted historic income tax rate cuts, regulatory reforms and spending controls. The recession officially ended in November 1982, and in the following two and a half years the unemployment rate dropped 3.6 percentage points, more than eight million Americans went to work at new jobs, and the longest period of economic growth in American history commenced.
Mr. Obama's policies have been just the opposite: trillion dollar stimulus-spending waste, a government takeover of the health-care system, an activist EPA attacking businesses, and demonization of job creators. The president barnstorms the country advocating tax increases for investors, entrepreneurs and small businesses, teeing up the country for another crash in 2013 when the Bush-era income tax rates expire. Meanwhile, America's businesses continue to suffer from the highest business tax rate in the industrialized world, with no relief in sight.
This nightmare will not end until Reagan-era economic policies are restored: tax reform, a sound dollar and smarter regulations. If they are, within a year the American economy will take off on another historic boom.
First, we must reduce the federal business tax rate to 12.5%, eliminate the capital gains tax as a double tax on capital income, and eliminate the estate tax. We must allow immediate expensing (writing off the costs in one year) for investment in capital equipment so American workers can continue to be the most productive in the world, using the latest and most advanced technology.
On the personal income side, I propose an optional 15% flat tax, allowing those American taxpayers who prefer it to file their returns on a postcard. This will save close to half a trillion dollars annually in tax-compliance costs.
These tax reforms are not designed to be revenue-neutral, but to maximize job creation, wages and economic growth. We will balance the budget with the revenues from such growth and spending cuts. That would include breaking up Fannie Mae and Freddie Mac into manageable, entirely private companies, with no government guarantees.
Second, the dollar needs to be stabilized by establishing a price rule for the Federal Reserve to follow in its conduct of monetary policy. This will help stabilize international exchange rates, resolve the ongoing cycles of global financial crises and investment bubbles, short-circuit the run-up in gas and food prices, and unlock the frozen credit system.
Third, the burden of regulatory costs on American businesses and consumers has to be lightened. Reflecting my unwavering opposition to cap and trade and any other form of tax on energy or carbon, we must replace the Environmental Protection Agency with an Environmental Solutions Agency. We must move from antigrowth confrontation with business to collaboration with job creators, states and local communities to achieve better results. We must repeal Dodd-Frank and its "too big to fail" big-bank bailouts, and repeal Sarbanes-Oxley, restoring Wall Street as the world's pre-eminent equities market.
We can slash further trillions in taxes, spending and regulatory costs by repealing and replacing ObamaCare with Patient Power, involving no individual insurance mandate and no job-killing employer mandate. We must also 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.
My economic plan includes sweeping entitlement reforms that would altogether cut federal spending in half over the long run, entirely solving the nation's entitlement and fiscal crisis. Reforms include starting and then expanding personal savings, investment and insurance accounts until they ultimately finance all the benefits now financed by the payroll tax--and eventually displacing that tax entirely. The successful federal welfare reform of 1996 should be expanded to every federal means-tested welfare program, close to 200 or more, block-granting them to the states and ultimately saving trillions.
We also need an American Energy Plan, freeing the energy industry to maximize production of all forms of American energy, ensuring the reliable supply of low-cost gasoline, diesel, natural gas, coal and other energy sources essential to fueling a booming economy.
These policies will ignite another record-smashing, and world-leading, 25-year economic boom, restoring the American Dream and rebuilding the America we love.