Issue Position: Economic Growth and Job Creation

Issue Position

"People create jobs, not governments."

Washington got the stimulus dead wrong. In a matter of months, Washington spent trillions of dollars and ran it all through government bureaucracy. Instead of creating new private sector jobs, we got more job losses, bigger government and more debt -- more than $13 trillion in federal debt that will cause long-term harm to the economy.

I believe government's role in economic recovery must be to help create an environment where small businesses can succeed and grow. Small businesses have historically created 70% of new jobs -- jobs that are self-sustaining and have a multiplier effect. Government jobs don't do that. To grow, small businesses need a reduced tax burden and predictability so that they can plan and make investments. The economy is trying to recover, but Washington won't let it. It is spending too much and creating tax and regulatory uncertainty that is paralyzing small businesses and stifling job creation.

It's time for Washington to take an honest assessment, recognize these economic policies are failing and change course. We need to stop government growth and deficit spending. Smaller government will decrease the tax burden on small businesses and it will help reduce debilitating federal regulations that make it difficult to impossible for small businesses to plan for the future, expand and create jobs.

Preserving The American Dream: A Plan To Put Connecticut Back To Work

When Ronald Reagan became president in 1981, he inherited an economy with no growth, high unemployment, high inflation and high interest rates. He did not propose a "stimulus' plan of the sort we have seen coming out of Washington lately. His plan was to restore incentives for building businesses. He wanted to get the government out of the way of private-sector job creators. The Reagan Plan had four principal initiatives:

* Reduce tax rates across the board.
* Reduce regulations and mandates on businesses.
* Sound government finances. Don't spend more than you can pay for.
* Sound money. Keep inflation low; keep the dollar strong.

Together, these policies increased growth, created jobs, and brought America's financial markets back to life, creating the greatest economic expansion in American history.

It's time to move away from artificial stimulus plans and move back to basics by doing the things that will help private business owners and workers grow their businesses.
Framework For Creating Jobs

People create jobs, not governments. The best way for the government to help create jobs is to give people incentives to work, save and invest by keeping tax rates and regulations low. The government's job is to promote a stable environment in which citizens can care for their families, build businesses and create wealth. It does this by ensuring rule of law, protecting property rights, enforcing contracts, maintaining the infrastructure, keeping prices level and the dollar stable and keeping people safe. Above all, the government should avoid doing harm by being a burden on people who want to build businesses and create jobs.
1. Prevent Tax Increases

Stop Anti-Growth Tax Policies.

* Prevent scheduled income tax rate increases and move to reducing the corporate tax rate.
o Huge personal income tax rates are already baked into the budget. Congress wants to raise them even higher to pay for ObamaCare and other costly new programs. Let's hold rates at their 2003-2010 levels (35% top rate) and make them permanent. And no surcharges above the statutory rate.
o Congress and the White House want to increase taxes. No school of economics supports increasing taxes during a recession.
o When you combine state and federal taxes, America has the highest corporate tax structure in the world. We should work to reduce the corporate income tax rate to be more competitive with the rest of the world.
* Stop the capital gains tax rate from going up.
o On January 1, 2011, the top rate on capital gains will go from 15% to 20%. This will drive capital offshore and cost jobs.
o According to the Congressional Budget Office, the last time the capital gains tax rate increased (1987), capital gains tax collections fell by 54% in the first five years and took a full decade to recover. [1]
* Stop the dividend tax rate from going up.
o On January 1, 2011, the top dividends tax rate will almost triple from 15% to 39.6%. This will sharply reduce the after-tax return on capital invested in America, reducing the value of American businesses and driving capital offshore. This means lower productivity, reduced take-home pay and lost jobs for American workers.
o Not preserving the 15% rate will decrease returns, decrease investment, lower productivity, lower workers' pay, and destroy jobs.
* Allow full same-year deductions for capital losses.
o Today, people pay taxes on all net investment gains in years when they have gains but can only declare losses up to $3000 ($1500 for married couples filing separately) in years when they have net losses. This is unfair, it discourages people from saving and investing, reduces the value of American companies, and kills jobs. Allowing full deductions of net losses is fair, makes sense and will help people recover from the devastating losses in real estate and stock markets during the financial crisis.
* Abolish both the estate tax and the gift tax.
o The death tax is the most unfair of all taxes. Eliminating the death tax will:
+ Create 1.5 million jobs in the U.S. [2], 19,600 jobs in Connecticut.
+ Lower the unemployment rate by almost one full point.
o People should be able to give their own after-tax money to their children without government permission and without paying taxes on the same money again.
o Together, this will end the growth-killing triple taxation of income: first as profits, then as capital gains or dividends, and finally as estate or gift taxes.
* Repeal the limits on tax-deferred retirement account contributions.
o We should not limit the amount of money people can save.
* Allow greater deductions for educational expenses.
o The unemployment rate for college graduates is 4% compared to 11% for those with only a high school diploma.
o We should increase the tax deduction on student loans and on qualified higher education expenses.

Create A Business Friendly Tax Policy

* Restore and make permanent the Research and Development tax credit to promote innovation.
* Allow businesses to deduct 100% of the cost of any capital expenses for equipment, technology, software, or buildings from their taxable income in the year they buy the asset.
o This stimulates investment in American businesses and increases the productivity of American workers.
* Eliminate the employer portion of the payroll tax for one year
o Expand recent proposals in Congress to all current employees and new hires legally authorized to work in the United States. Allow the reduced rate for one year from the date of enactment for small businesses as defined by the Small Business Administration.

2. Reduce Regulations

Eliminate Anti-Growth Legislation and Policies.

* Reduce burdensome regulations and mandates on businesses.
o Review and repeal all regulations and mandates that inhibit growth.
o Do not pass further burdensome regulations
o These regulatory taxes do not appear on any balance sheet, yet cost Americans about $1 trillion every year. [3]
o During fiscal year 2009, regulations costing some $14 billion were adopted, more than in any year since 1992. [3]
* Stop Cap-and-Trade legislation, which could be the most antigrowth legislation of all.
o Cap-and- trade would destroy on average 13,649 jobs in CT and raise electricity prices by $927.55 per household. [4]
* Stop Card check legislation.
o Free and secret-ballot elections are a basic American right.
o A conservative estimate is that if Congress passed card check, it would reduce jobs by 765,000 within two years. [5]
* Resist protectionist policies that hamper global trade and investment.
o The President has said that increasing U.S. exports by just 1% would create over 250,000 jobs. And the International Trade Commission (ITC) estimates that implementation of the Colombia, Panama, and Korea Free Trade Agreements would increase U.S. exports by more than 1%. Despite this, Congress is failing to act. We should pass the pending trade agreements immediately and start creating jobs.
* Increase energy supplies
o Increase nuclear power
+ The federal government should allow the industry to operate under free market principles and establish predictable, effective regulation that will ensure safety and security. [6]
+ Over 75% percent of France's power comes from nuclear as opposed to only around 20% in the United States.
o Increase domestic energy exploration
+ With the recent disaster in the Gulf of Mexico as a very painful reminder of the need for significant oversight of our drilling operations, we must move forward with future explorations by first recertifying existing operations and processes. Prospective exploration must also get expanded scrutiny.
+ Offshore exploration creates jobs and increases energy supplies without cost to the taxpayer. It will create revenues for financially strapped state governments and increase revenues for federal governments. [7]
+ According to an American Energy Alliance report, drilling in the Outer Continental Shelf (OCS) would generate [8]:
# $8 trillion in economic output to the GDP
# $2.2 trillion in total tax receipts
# 1.2 million jobs annually across the country
# $70 billion in additional wages each year
o Increase Alaska drilling and production
+ The Coastal Plain of ANWR could produce up to 1.5 million barrels per day for at least 25 years, nearly 25% of current daily U.S. production. [9]
+ The U.S. would save $14 billion per year in oil imports. [9]
+ Between 250,000 and 735,000 jobs are estimated to be created by development of the Coastal Plain. [8]
+ Prudhoe Bay, located 60 miles to the west of ANWR, has been operating for nearly 20 years and has produced in excess of 10 billion barrels of oil during that time. It is among the most environmentally sensitive oil operations in the world. [9]
o Increase oil exploration elsewhere within our own borders, e.g. the Green River formation and the Bakken Shale deposit
+ The Green River formation could contain 800 billion barrels of recoverable oil from oil shale, which is three times greater than the proven oil reserves of Saudi Arabia. [10]
+ The Bakken Shale could contain up to 4.3 billion barrels of recoverable oil, according to the U.S. Geological Survey.
o Support the development of promising renewable energy sources
+ Federal tax policy should be focused on aggressively supporting private sector exploration and innovation of promising renewable energy technologies.
+ Incentives for renewable energy technology development would be especially significant for Connecticut, which has considerable private sector initiatives underway in the areas of wind, solar, and geothermal energy, as well as the development of synthetic fuels. Connecticut is already recognized as the fuel cell capitol of the world.

End the Use of "Policy Czars" to Evade Congressional Oversight

* Stop proliferation of Executive Orders in place of legislation.
o Executive Orders do not require Congressional approval to take effect but they essentially have the same legal weight as laws passed by Congress.
o President Obama has issued 57 Executive Orders since taking office. [11]
* Restore the constitutionally determined balance of power.
o Restore the checks and balances put in place by our founding fathers ensuring no branch of government becomes more powerful than another and protect the states from overreaching by the federal government.

3. Restore Government Finances

Control Government Spending

* Bring government spending back under control.
o Government must live within its means just as families and businesses do.
o Our national debt is $13.2 trillion.
o The projected budget deficit for fiscal year 2010 is a record $1.56 trillion.
* End off-budget expenditures.
o Include the receipts and disbursements of the Social Security trust funds (Old-Age and Survivors Insurance Fund and Disability Insurance Fund) as well as Fannie Mae and Freddie Mac in the budget.
* Institute a Balanced Budget Amendment
o Prevent deficit spending except during emergencies, such as war or natural catastrophes.
o All the states except Vermont have a legal requirement of a balanced budget. [12]
* Take back unspent funds from TARP, other stimulus programs to repay debt.
o Congress has the power to do this today, but the politicians will not let it happen.

4. Restore Sound Money

Stabilizing the Price Level and the Dollar so Businesses Can Get Back to Work.

* Support measures to make credit available to small businesses and to end the roller coaster of booms and credit crunches that make it so difficult to run and grow a business and hire people.
o Banks have stopped lending to small businesses as a result of current monetary policy. Banks have loaned businesses $300 billion dollars less since this time last year, the biggest drop in lending (-7.4%) since 1942, 67 years ago.
o Capital is being rationed on availability and connections, not on price or the credit quality of the borrower or interest rates.
o End the practice of government micromanaging banks through subsidies and stimulus programs.
o Regulators are a big part of the problem -- they must stop using mark-to-market accounting to regulate bank capital adequacy. When asset prices fall for any reason, banks are automatically forced to reduce lending.
o The Fed must end the roller coaster of booms, bubbles and busts that happens when they drive interest rates up and down.
* Re-establish strict congressional oversight of Fed activities.
o Clarify that the Fed's job is to provide stable prices and a stable dollar.
o Get the Fed out of the bailout business as soon as is practicable. Reduce their balance sheet back to pre-crisis levels.
o Never again delegate unsupervised authority over trillions of dollars of taxpayer funds to appointed officials.

[1] Congressional Budget Office, "Capital Gains Taxes and Federal Revenues," October 9, 2002. http://www.cbo.gov/ftpdocs/38xx/doc3856/TaxBrief2.pdf

[2] A recent study by former CBO Director Douglas Holtz-Eakin, full repeal of the Death Tax would create 1.5 million new jobs, http://www.estatetaxtruth.org/_documents/holtz-eakin_study.pdf

[3] http://blog.heritage.org/2010/04/02/red-tape-rising-regulation-in-the-obama-era/

[4] http://www.heritage.org/Research/Reports/2009/08/Impact-of-the-Waxman-Markey-Climate-Change-Legislation-on-Connecticut

[5] Heritage Foundation calculations based on the assumption of a 10.8 percent employment decline and the 7.1 million new workers the AFL-CIO estimates would organize under EFCA.

[6] http://www.heritage.org/research/energyandenvironment/wm2475.cfm

[7] http://blog.heritage.org/2010/02/11/how-about-some-transparency-on-offshore-drilling/

[8] http://www.americanenergyalliance.org/images/aea_offshore_updated_final.pdf

[9] http://www.anwr.org/Background/Making-the-Case-for-ANWR.php

[10] http://ostseis.anl.gov/guide/oilshale/

[11] http://www.archives.gov/federal-register/executive-orders/obama.html

[12] http://www.ncsl.org/default.aspx?tabid=12660

The McMahon jobs plan is a product of Linda McMahon's 30 years of creating jobs in Connecticut. It relies heavily on input from scores of discussions with Connecticut business leaders, small business owners and entrepreneurs. The plan was produced in consultation with Linda McMahon's chief economic advisor, Dr. John Rutledge, who is broadly regarded as "one of the principal architects of the Reagan economic plan in 1980-81." In his role as Chairman of Rutledge Capital, Dr. Rutledge has advised numerous public policy think tanks, corporations, and financial institutions, as well as public officials in the U.S., Europe, Asia and the Middle East.

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