Address to Atlanta Press Club 6.22.11
Thank you for allowing me to join you today to share some thoughts about the future of our country.
Today, more Americans are without jobs, and for longer periods of time, than at any time in our history since the Great Depression.
We have seen a collapse in home prices on a scale worse than during the Great Depression. One out of every four American homes is now worth less than its mortgage. Homes in the Atlanta area are now worth no more than they were at the end of 1999. And there are some signs home prices may continue sliding.
There are nearly 45 million people -- nearly one in seven Americans -- currently receiving food stamps, the highest number in history.
We spent $140 billion on unemployment compensation last year -- again, the highest figure in history and over seven times what we were spending just a decade ago.
The pain inflicted by the Obama Depression runs deep. Beyond the 14 million Americans who are "officially" unemployed, another 6 million Americans have become disillusioned and have given up looking for jobs altogether.
The unemployment rate for African-American youths looking for work was a staggering 41% in May.
The jobs crisis is an historic national crisis and the Obama Administration has only made it worse by pursuing job-killing policy after job killing policy.
This is why I will spend every day of my campaign and then every day of my administration, if elected, working for economic policies that help create jobs, not kill them.
We need to replace the "food stamp President" with a "paycheck President".
I truly believe we can overcome this crisis. I believe we can create jobs and get America on the right track.
But renewing America will require the commitment, perseverance, and hard work -- not of any one man or woman -- but of Americans from every walk of life who are united by a belief in freedom and self-government.
Last month, I was the first presidential candidate to put forward a jobs and prosperity plan.
It starts with cutting taxes, cutting spending, cutting burdensome regulations, and enacting an effective American energy policy.
We must make America once again the most desirable country in the world for job creating investment. To do this we need a bold series of four tax cuts.
We should eliminate the capital gains tax and the death tax. We should reduce America's corporate tax rate, now the second highest in the industrialized world, to 12.5%. And we should allow for 100% expensing of investment in new equipment.
We should also not raise current tax rates now, or in the future. I will block any proposed tax increases in 2013 and beyond. It makes no sense to raise taxes and kill more jobs in a deep recession.
The Obama approach on energy has been to erect barriers that prevent us from taking advantage of our vast American natural resources. In the process, the price of a gallon of gas has gone up by nearly two dollars since he took office. We need an American energy policy that favors less expensive gasoline, diesel, natural gas, and electricity.
We also need several pro-growth regulatory reforms that remove obstacles to job creation.
This begins with repealing Obamacare and replacing it with a pro-jobs, pro-responsibility plan that focuses on Patient Power and puts doctors and patients in charge of health decisions instead of bureaucrats.
The Gingrich Jobs and Prosperity Plan will be a dramatic reversal of the policies of the Obama Administration. It takes responsibility out of Washington and puts it in the hands of American entrepreneurs and consumers.
You can find all the details of the Gingrich jobs and prosperity plan at newt.org.
However, there is little hope that these tax and regulatory changes will sustain long-term economic growth if they are not also accompanied by a fundamental reappraisal and restructuring of the Federal Reserve and the repeal of the Dodd-Frank legislation, which are the focus of my remarks today.
Let's start with the Federal Reserve.
The operations of the Federal Reserve have an extraordinary impact over our everyday lives.
The Fed influences how much money is circulating in the economy, the value of the dollar, and what we pay to borrow from banks in the form of interest rates.
Since the enactment of legislation in 1978 known as the Humphrey-Hawkins Act, the Fed has had a dual mandate: maximum employment and stable prices. These two goals are incompatible.
As a part of a thorough reappraisal of the role of the Federal Reserve System, Congress should immediately narrow the focus of the Fed to the sole goal of stable prices.
Senator Bob Corker may have said it best when he described the Fed as having today a "bipolar mandate."
This means that the same policies that the Fed uses to encourage job and economic growth are also the mechanisms that most dangerously weaken the value of the dollar by promoting inflation.
For example, the Fed might increase the money supply substantially in the belief that such monetary expansion will spark economic growth.
But a Fed that floods the economy with new dollars in an attempt to stimulate economic growth and new jobs is a Fed that decreases the value of every dollar in every American's pocket through higher inflation, making every American poorer.
Look at what has already happened. Today we have a dollar that is stunningly weaker than it used to be, and the price of everything from gasoline to groceries is steadily drifting upward.
A dollar in 2011 only buys what 76 cents did in 2000. The Euro and Dollar were at parity in January 2000 -- today, the Dollar only buys 70 Euro cents. That's right: Even as the Greek economy crumbles, threatening a domino effect across southern Europe, the Euro is still worth nearly 150 percent of the dollar.
Historically low interest rates made possible by Fed policies over the past decade fueled an inflationary housing bubble. Home prices exploded due in part to the availability of cheap credit only to collapse disastrously in 2006 and 2007.
As a result, the average American's home is worth no more than it was a decade ago.
The Fed's dual mandate also negatively affects job creation. To put it briefly, we will never be able to achieve sustainable long-term job creation in this country if the Fed continues to artificially affect the level of interest rates.
Artificial interest rates distort investment decisions all across the economy, resulting in a misallocation of productive resources that cannot be sustained over the long term. Eventually, artificially low rates lead to an economic bust and widespread job losses. Only when interest rates are no longer manipulated can businesses and entrepreneurs determine the right investments that can in turn lead to sustainable job creation throughout the economy.
During the 2008 financial crisis, the powers of the Federal Reserve took center stage.
In the heat of the crisis, the Fed made thousands of emergency loans to banks and other large institutions for reasons that are not entirely clear. These loans totaled at least three trillion dollars.
At the time, all of this money was lent out with complete secrecy, with no oversight from our elected representatives in Congress.
We are only beginning to learn about the true nature and scope of the lending. What we are discovering is shocking and infuriating.
If that were not bad enough, Federal Reserve Chairman Bernanke then spent the next two years fighting to make sure the American people did not know who actually received any of this money.
Now, thanks in part to a tenacious effort by Bloomberg and the Fox Business Channel, along with committed legislators, the Fed has begrudgingly made two rounds of disclosures about who got the money and how much between 2007 and 2010.
The truth is shocking.
For example, between 2008 and 2010, the Fed extended dozens of loans, totaling at least five billion dollars, to the Arab Banking Corporation.
A major shareholder of the Arab Banking Corporation is the Central Bank of Libya, which is controlled by Muammar Gaddafi's regime.
Other examples show that while the Treasury was bailing out the American auto industry, the Fed was busy purchasing securities from foreign competitors, including German firms BMW and Volkswagen, and Japanese firms Toyota and Honda.
It is a fact that the Fed also purchased hundreds of billions of dollars worth of securities from foreign banks, including Germany's Deutsche Bank and Switzerland's Credit Suisse.
And during this time the Fed extended billions of dollars in commercial credit to American corporate giants, such as General Electric, Verizon, Caterpillar, and McDonalds, in late 2008 and early 2009.
With so much activity going on behind the closed doors of the Federal Reserve in Washington and New York, we must undertake a full-scale and comprehensive audit of the Federal Reserve.
We should never again have to go to court and beg to find out what actions the politicians and bureaucrats are doing that risk depreciating the dollar and exposing the taxpayer to enormous losses.
It is our right to know now who got the money and why.
A few bold measures by Congress and media outlets have begun to shed light on exactly what happened during the crisis, but we deserve the whole story.
A comprehensive audit of the Federal Reserve and a narrowing of its statutory mandate should only be the beginning of reassessing the role of the Federal Reserve.
Decisions by unelected and largely unaccountable Federal Reserve bureaucrats naturally leave Americans feeling outraged and helpless, especially when these decisions have as a consequence the debasing of our currency and the bailing out of favored interests.
Unfortunately, this idea that we would want a dramatically more limited Federal Reserve is not very popular in Washington.
And let me say in this regard that there is no elected official who has done a greater job of bringing to public attention the very serious problems raised by the operations of the Federal Reserve than Texas Congressman and presidential candidate Ron Paul.
We all owe him a debt of gratitude for focusing our attention on the very real erosion of American freedom and prosperity caused by the actions of the Federal Reserve.
The second subject of my remarks today concerns the legislation known as "Dodd-Frank".
I believe that the Dodd-Frank legislation is the most destructive assault on businesses in a decade.
This legislation positively discriminates against independent and community banks and buries them under a blizzard of red tape and regulations, making it hard for them to survive.
Yet, independent and community banks are the very lifelines to American small businesses, which are themselves the engines of American job creation. These independent and community banks support over half of the small business loans made in America.
Fewer independent and community banks means fewer small business loans, which means fewer jobs and rising unemployment.
It is a job killing equation that that authors of Dodd-Frank apparently never bothered to evaluate.
Because Dodd-Frank is legislation that kills jobs, it must be repealed.
It is yet another example of the Left overreacting to a crisis by allocating massive new regulatory powers to bureaucrats -- the same bureaucrats who claimed to have been in control immediately prior to the crisis.
We saw this same faith in bureaucracy phenomenon in 2002 with the passage of the Sarbanes-Oxley Act, which placed prohibitively expensive compliance burdens on publicly traded firms and eroded American competitiveness and which is still killing jobs today.
According to the U.S. Chamber of Commerce, Dodd-Frank contains 259 mandated rulemakings, another 188 suggested rulemakings, and provides for 63 reports and 59 studies.
Dodd-Frank harms small independent and community banks in two principal ways.
First, it creates two classes of banks. Big banks that have the backing of the federal government, and small banks that do not.
Dodd-Frank's proponents claim that it ends "too big to fail"--the practice of the government guaranteeing that it will use taxpayer dollars to save a failing bank, so long as it is big enough.
However, the government will be giving special attention to the big banks that it deems to be "systemically important." As my former colleague at the American Enterprise Institute Peter Wallison points out, these big banks may be scrutinized more heavily than others, but they will also have implicit guarantees for government support that others will not have.
"The [Dodd-Frank] DFA changes the competitive environment for financial services in the United States by providing for different regulation of large firms than small ones. In effect, the firms that are designated as systemically important have been declared too big to fail. While the act also provides that these firms cannot be bailed out in the event of their failure or financial distress, it gives the Federal Deposit Insurance Corporation enough authority and discretion to save most if not all of their creditors from losses in the event of their failure. This, together with the fact that these firms will be specially regulated by the Fed, will create moral hazard; the creditors of these companies will believe that they face lower risks of loss than the creditors of other companies. For this reason, the companies designated as systemically important will likely have a lower cost of funds than their smaller competitors and thus an unfair competitive advantage that will suppress competition from smaller firms."
With government backing, these big banks will have substantial competitive advantages over their smaller competitors who will be left to fend for themselves. Major investors will put their money in government guaranteed too big to fail banks and avoid small independent banks which will be starved of major depositors.
Second, Dodd-Frank will create staggering new costs that banks will have to pay in order to comply with all of the new regulations.
As with any new regulatory burden, smaller institutions are at a severe disadvantage compared to larger institutions when it comes to compliance.
Goldman Sachs will be able to hire 100 lawyers in order to comply with new rules without much of a problem. But for smaller banks that serve communities, even bringing in one new employee to deal with compliance could make the difference between turning a profit and going out of business.
Community banks have been urged to keep substantially more capital on hand in order to pay for the new regulations in Dodd-Frank. They have been told that they may have to merge or else risk shutting down completely.
This would be a tragedy, and devastating for anyone who wants to start or expand a small business and create jobs for the 14 million Americans currently unemployed.
And the bureaucratic rulemaking goes on. Regulators are now considering a rule arising from Dodd-Frank that would penalize banks for making home loans to anyone except borrowers willing to put a 20 percent down payment on a new home. Such a proposed rule reflects a fundamentally misguided worldview that prevails in Washington: that bureaucracies know best; that bureaucracies are capable of effective central economic planning; that bureaucracies and their rulemaking are superior to the prices and practices that arises from the give and take of a free market.
When we have a greater home price reduction than in the Great Depression does it make any sense to make it even harder to buy a house thus further depressing housing values?
When one out of every four American homes is worth less than its mortgage does it make any sense for our government to make a housing revival even more difficult and even further away?
Of course not.
Two major steps toward a recovery in jobs and housing values are clear.
First, repeal the Dodd-Frank law immediately.
Second, audit and reform the Federal Reserve system.
These are actions Washington can take to clear the path to creating jobs and raising home values.
These are actions we should all demand that Washington take NOW.