Several Republican presidential candidates have rolled out economic plans they claim will jumpstart the moribund U.S. economy and narrow the nation’s yawning fiscal gap.
Texas Gov. Rick Perry’s plan creates an optional 20 percent flat income tax, restricts federal spending to 18 percent of GDP, and seeks a balanced budget by 2020. His plan also calls for lowering the corporate tax to 20 percent and ending other taxes, including the estate tax and taxes on many capital gains and Social Security benefits.
Georgia businessman Herman Cain has enjoyed a recent surge in the polls after he proposed scrapping the entire federal tax code and replacing it with 9 percent taxes on corporate and personal incomes, and a 9 percent federal sales tax. The plan has come to be known as the “9-9-9 Plan.”
Former House Speaker Newt Gingrich is pushing a plan that includes a 15 percent optional flat tax on personal income and a 12.5 percent corporate tax he says would lead to increased capital investment and job growth.
Former Massachusetts Gov. Mitt Romney has a plan that calls for the elimination of taxes on capital gains, dividends, and interest on Americans with incomes of up to $200,000, cutting nonmilitary discretionary spending by 5 percent, reducing the federal workforce by 10 percent through attrition, and capping federal government spending at 20 percent of GDP.
All of these plans have their pluses and minuses; and to the extent that they would simplify the tax code and reduce the overall burden of government, they would be an improvement over the current Byzantine system, which has become an instrument of mass wealth redistribution, political intimidation, and social engineering.
But the problem with all of these plans is that they’re woefully inadequate to the task of dealing with the nation’s daunting economic challenges. While Perry, Cain, Gingrich, and Romney have talked up tax cuts, they have been vague when discussing spending cuts, and they shy away from supporting the radical changes in policy that are necessary if the country is to avert the impending economic train wreck. Moreover, none of them address the Federal Reserve, monetary policy, and the U.S. government’s global domination project, which establishmentarians like to refer to as “foreign policy.”
These candidates are oblivious to the magnitude of the economic crisis, so they are content with putting forth “bold” proposals that only address relatively trivial matters while ignoring the nation’s core economic problems.
The U.S. government has accumulated almost $16 trillion in debt (adding $10 trillion in the last decade alone) and has run annual budget deficits in excess of a trillion dollars for three consecutive years. Deficits of this size exceed our nation’s foreign creditors’ trade surpluses, forcing the Federal Reserve to resort to outright debt monetization. The prognosis for the country’s long-term fiscal health is bleak. Politicians since 1965 have made promises to the voters they cannot keep. Washington’s unfunded liabilities are estimated to be well north of $100 trillion, and some estimates have them as high as $200 trillion.
To make matters worse, our political rulers appear determined to continue with an imperial foreign policy that includes the overseas deployment of hundreds of thousands of troops, occupying two Muslim countries, maintaining a global network of military bases, bombing defenseless civilians, staging coups, bribing and propping up brutal dictatorial regimes, operating CIA “black sites” where “terrorist suspects” are held indefinitely and routinely tortured, and waging illegal foreign wars on transparently false pretenses. The U.S. government’s belligerent interventionism is not only undermining genuine national security by creating mayhem and stirring up hatred abroad, it is also very expensive, costing the taxpayer more than $1 trillion a year.
Such policies are morally objectionable under any circumstances. But continuing with them while the country is experiencing an economic meltdown — which has relegated 45 million Americans to relying on food stamps and has driven the real unemployment rate up to 20 percent — is even more atrocious. In attempting to prove the United States is the “indispensable nation,” our political leaders have made us an insolvent nation.
The political establishment is incapable of dealing with the crisis; indeed, they were culpable in bringing it about. Both political parties want big government in order to dole out taxpayer-financed goodies to their constituents. Generally, the Democrats want more bankrupting welfare programs and the Republicans favor more bankrupting warfare programs. So, in the spirit of bipartisanship, the two parties reach a consensus whereby both demands are met and financed through debt and inflation. This arrangement appeared to work well for a few decades, but now the bill has come due.
Into this breech has stepped Rep. Ron Paul of Texas. He unveiled an economic plan last week that is genuinely bold, cutting $1 trillion off the federal budget in one year by eliminating no fewer than five Cabinet departments, slashing the EPA’s budget by a whopping 30 percent, and ending funding for the U.S. government’s foreign wars. Paul’s plan would also cut or eliminate a slew of taxes and significantly reduce the regulatory burden by repealing Obamacare, Sarbanes-Oxley, and the Dodd-Frank Act.
Dr. Paul has also said he would like to wean the American people off Social Security and Medicare by phasing the programs out. Such a plan, if implemented, would go a long way towards closing the country’s fiscal gap, because these programs comprise the greater part of the U.S. government’s unfunded liabilities.
Dr. Paul’s call to slash federal spending and actually close down entire agencies is certainly radical by the standards of the political mainstream, but the truly revolutionary part of his plan is his proposal for a full audit of the Federal Reserve and the introduction of competing-currency legislation to prevent further devaluation of the dollar. These two ideas are truly radical in the sense that they strike at the root of the problem.
A full audit of the Federal Reserve, an institution whose activities have been shrouded in secrecy for almost a century, would likely reveal a long train of abuses. The ensuing public outrage would contribute to a political environment favorable to those who seek the central bank’s closure. Furthermore, Paul’s plan to repeal the federal government’s legal-tender law would go along way towards guaranteeing a sound currency by effectively denying to the U.S. government the power to inflate the money supply.
Dr. Paul’s 2012 presidential campaign is the culmination of a political career that has been dedicated largely to exposing the nation’s banking system as a cartel shot through with special privileges and moral hazards, and shedding light on the Federal Reserve, which sits atop this corrupt pyramid.
Ron Paul has fired a shot across the establishment’s bow. The Federal Reserve System is the great enabler of big government and the fiat-dollar standard is the financial backbone of the American Empire. The ruling elite exploit the “exorbitant privilege” the U.S. dollar enjoys as the world’s reserve currency in order to run massive budget deficits while keeping interest rates artificially low. It is through the inflationary mechanisms of central banking that the governing and corporate elite finance their speculative schemes, bailouts, welfare programs, and imperial projects.
Dr. Paul’s plan is truly revolutionary. Right now, he is considered a long shot in the presidential race, and the establishment believes it can still treat him as a gadfly or mere curiosity. But his campaign is well funded and much better organized than in 2008.
Moreover, the objective conditions of the country favor Ron Paul’s candidacy. The economy’s continued deterioration coupled with the taxpayer-financed corporate bailouts has discredited the establishment in the eyes of the public. And the rise of alternative media undermines whatever blackout the mainstream media attempts to impose. Should Paul’s message gain broader support among the voting public, the ruling elite will have no other alternative than to take him very seriously.
About the author: Tim Kelly is a columnist and policy advisor at The Future of Freedom Foundation in Fairfax, Virginia, a correspondent for Radio America's Special Investigator, and a political cartoonist.
This article was published by The Future of Freedom Foundation.