/PRNewswire-USNewswire/ -- The following is a commentary written by Richard C. Leone, president of The Century Foundation, and Anthony Shorris, a fellow at The Century Foundation and former executive director of the Port Authority of New York and New Jersey:
While a lot of questions remain about how America got into this economic crisis, the new Congress and Administration quite sensibly have refocused the debate on the key immediate issue: how do we escape the whirlpool of job losses and recession swiftly and effectively? While some fringe-dwelling extremists still hold out for total reliance on the marketplace to sort things out, almost everyone else seems certain that our most immediate goal has to be to use federal interventions to restore demand for goods and services in order to reduce (and eventually reverse) the cascading rate of layoffs as fast as possible.
So it's particularly troubling that support is slipping for counteracting one of the biggest sources of the next round of job losses and spending reductions. Posturing and ideological cant on Capitol Hill are threatening to gut the $40 billion in assistance targeted for America's state and local public sector included in the House of Representatives stimulus package.
Meanwhile, all across the country - in red states and blue - governors and mayors are preparing to fire hundreds of thousands of workers at just the moment when jobs are most needed. While we hear plenty of echoes of yesteryear demanding corporate tax cuts in the far-fetched hope that they'll lead to fewer private sector layoffs, readers of another section of every local paper see vast numbers of middle class jobs poised for elimination. Already, 46 states are reporting collapsing fiscal conditions - the combined deficits of the states could approach $350 billion in the current and next fiscal years combined - and 36 of them are making massive reductions in state employees as well as other budget cuts that will require their localities to do the same. California has furloughed 200,000 workers already. New York City's Mayor Michael Bloomberg plans to drop 23,000 workers. Governor Jon Corzine in New Jersey has reduced the state workforce by 2,000, with more reductions to come. It's the same story in virtually every major state.
State and local governments are in dire need of a federal tourniquet to staunch the bleeding. They are required by law to run balanced budgets -- unlike the federal government or most companies, they can't borrow to pay for workers' salaries - so they have no tools to fight off job cuts when times get tough except to raise taxes, a politically unpalatable option anytime. Worse, state and local taxes are almost always more regressive than federal levies, forcing elected officials to risk voters' wrath just to hike those taxes that impose the greatest relative burdens on those most at risk.
Thus the two options open for governors, county executives and mayors struggling to balance their budgets as their own government's revenues plummet are entirely inconsistent with the thrust of the federal stimulus program.
Massive tax increases are on the table in virtually every state - New York's Governor David Paterson has proposed more than $3 billion in increases while Governor Schwarzenegger of California has his state looking at some $14 billion in revenue actions. Forcing states and localities to raise their own taxes mutes the impact of any federal tax cuts designed to stimulate the economy, while allowing massive numbers of state and local layoffs to offset nationally-funded job creation seems worse than short-sighted - it's just plain crazy.
Federal investments in state and local programs can not only preserve middle class jobs when they are most needed, but they can also meet one other test if handled wisely. There are few infrastructure projects or federal programs that can create jobs immediately while also making the nation structurally stronger for generations to come. Yet retaining teachers who educate children, keeping maintenance workers who preserve decaying infrastructure until replacements arrive, avoiding cuts in preventive health care services, or hiring police officers who take criminals off the streets can be investments in the future just as much as a new exit ramp off an exurban freeway. Yet the Senate stimulus package slashes $40 billion in support for the states at just the moment when it's needed most.
The kinds of crisis managers who are responsible for important facilities anywhere in the world are taught to ask four simple questions at the onset of any emergency, whether it's a fire, hurricane or terrorist attack: What happened? How bad is it? What's being done and by whom? And, how do we keep it from escalating? Today, America is facing an economic crisis much like these more familiar kinds of disasters, and the same four questions deserve to be answered. While we'll eventually sort out the answers to the first three of these, the recently altered Senate version of the stimulus bill shows we're at risk of making a dangerous mistake on the fourth.
Let's treat this like the crisis that it is, and stop the one form of escalating disaster we can be certain of ending. There will be plenty of time for experimentation and ideological point-scoring later. For now, let's just start by making sure the disaster we are confronting does not spread into the states and localities in which we all live.
Richard C. Leone is president of The Century Foundation, a public policy research organization, and former state treasurer of New Jersey. Anthony Shorris is a fellow at The Century Foundation and former Executive Director of the Port Authority of New York and New Jersey.
Showing posts with label economic. Show all posts
Showing posts with label economic. Show all posts
Wednesday, February 11, 2009
Monday, February 9, 2009
Growing the Economy: Three Models of Failure, Three Models of Success
/PRNewswire-USNewswire/ -- The following release was issued today by Americans for Tax Reform:
There's a debate raging in Washington over how to improve economic growth. On the one side, President Barack Obama, Harry Reid, Nancy Pelosi and the liberal establishment wants to "stimulate" the economy by stealing money from taxpayers and giving it to unionized government make-work projects. On the other side, free market conservatives favor lower marginal tax rates, full business expensing, tax-free savings, free trade, sound money, and lower government spending. In the recent past, there have been three models of "stimulus" failure, and three models of free-market success.
Failed "Stimulus" Plans
1. In 1997, Argentina's economy began to worsen. In response, Argentine non-interest government spending grew from 23% of GDP in 1997 to 25% of GDP by 2001. The equivalent in the U.S. would be an immediate increase in government spending of nearly $300 billion. Despite this, average real GDP growth in the period was just 0.7%. (1)
2.In the 1990s, Japan tried to grow government to "prime the pump" of the economy. Government spending grew from 32% of GDP in 1991 to 38% of GDP in 2000. The equivalent in the U.S. would be an immediate increase in government spending of nearly $900 billion. After this experiment, Japan's per-capita national income fell from 86 percent of the U.S. level in 1991 to only 74 percent in 2000. The people of Japan became poorer after this massive government "stimulus." (2)
3. In 1929, the U.S. entered the Great Depression. In the decade following, a Republican failed president (Herbert Hoover) and a Democrat failed president (FDR) increased federal spending from 3.4% of GDP in 1930 to 10.3% of GDP in 1939. The equivalent today would be an immediate increase in government spending of $1 trillion. Despite all the spending of the New Deal, the U.S. economy actually shrank from $97.4 billion to $89.1 billion, or nearly 10 percent in 10 years. (3)
Successful Growth Models
1. In late 1963, Congress implemented the Kennedy tax cut, which lowered the top marginal personal income tax rate from 91% to 70%. Until LBJ raised taxes to pay for the Vietnam War and Great Society, average annual real GDP growth from 1964-1966 was 6.2%.
2. In 1983, the Reagan tax cuts were fully implemented. They reduced the top marginal income tax rate from 70% to 50%, and also cut the corporate income tax rate. The top personal rate was reduced to 28% in 1986. Average annual real GDP growth from 1983 to 1989 (the last year before the George H.W. Bush tax hike) was 4.3%.
3. In 2003, President George W. Bush cut the top personal rate from 38.1% to 35%, the dividend rate from 38.1% to 15%, and the capital gains rate from 20% to 15%. Until Democrats took over Congress in 2006 and announced the imminent end of these lower tax rates, real GDP growth averaged 3.0% per year.
There are two models at work here:
-- Keynesian Stimulus. The government spends taxpayer money on projects
to "create jobs." The only jobs that are created are in the sprawling
government bureaucracies. Because the government cannot spend any
money on the economy it did not first take from the economy, this
model cannot create economic growth. It failed in Japan and Argentina
in the 1990s, and right here in America in the 1930s. Economic growth
was stagnant or negative in all three cases. The government purely
and simply wasted taxpayers' money.
-- Growth Economics. When marginal tax rates on work, saving, and
investment are cut, incentives to produce more work, savings, and
investment go up. The Kennedy tax cuts worked. The Reagan tax cuts
worked. The Bush tax cuts worked. In all three cases, lowering
marginal tax rates caused economic growth to rise and for all
Americans to be better off.
How to Grow the Economy Now and Permanently
1. Cut the top personal income tax rate from 35% to 25%
2. Cut the corporate income tax rate from 35% to 25%
3. Cut the capital gains and dividends rate from 15% to 0%
4. Move to full business expensing of all business investments
5. Stop double-taxing U.S. employers on their income earned overseas
6. Kill the Death Tax
7. Kill the Alternative Minimum Tax (AMT)
8. Cut the payroll and self-employment tax rate in half, from 15.3% to 7.5%
9. Cap government spending to the pre-Bush level of 18% of GDP
10. Require full government transparency to ensure that taxpayer money is not wasted
Americans for Tax Reform (ATR) is a non-partisan coalition of taxpayers and taxpayer groups who oppose all federal, state and local tax increases. For more information or to arrange an interview, please contact John Kartch at (202) 785-0266 or at jkartch@atr.org.
Permalink: http://www.atr.org/content/html/2009/feb/020909pr-growing_the_economy_three_mo dels.html
Notes:
(1) http://www.imf.org/external/np/speeches/2002/071702.htm
(2) http://www.heritage.org/research/economy/bg2222.cfm
(3) http://www.gpoaccess.gov/usbudget/fy09/sheets/hist01z2.xls
(4) All real GDP growth figures in the successful models taken from U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts.
There's a debate raging in Washington over how to improve economic growth. On the one side, President Barack Obama, Harry Reid, Nancy Pelosi and the liberal establishment wants to "stimulate" the economy by stealing money from taxpayers and giving it to unionized government make-work projects. On the other side, free market conservatives favor lower marginal tax rates, full business expensing, tax-free savings, free trade, sound money, and lower government spending. In the recent past, there have been three models of "stimulus" failure, and three models of free-market success.
Failed "Stimulus" Plans
1. In 1997, Argentina's economy began to worsen. In response, Argentine non-interest government spending grew from 23% of GDP in 1997 to 25% of GDP by 2001. The equivalent in the U.S. would be an immediate increase in government spending of nearly $300 billion. Despite this, average real GDP growth in the period was just 0.7%. (1)
2.In the 1990s, Japan tried to grow government to "prime the pump" of the economy. Government spending grew from 32% of GDP in 1991 to 38% of GDP in 2000. The equivalent in the U.S. would be an immediate increase in government spending of nearly $900 billion. After this experiment, Japan's per-capita national income fell from 86 percent of the U.S. level in 1991 to only 74 percent in 2000. The people of Japan became poorer after this massive government "stimulus." (2)
3. In 1929, the U.S. entered the Great Depression. In the decade following, a Republican failed president (Herbert Hoover) and a Democrat failed president (FDR) increased federal spending from 3.4% of GDP in 1930 to 10.3% of GDP in 1939. The equivalent today would be an immediate increase in government spending of $1 trillion. Despite all the spending of the New Deal, the U.S. economy actually shrank from $97.4 billion to $89.1 billion, or nearly 10 percent in 10 years. (3)
Successful Growth Models
1. In late 1963, Congress implemented the Kennedy tax cut, which lowered the top marginal personal income tax rate from 91% to 70%. Until LBJ raised taxes to pay for the Vietnam War and Great Society, average annual real GDP growth from 1964-1966 was 6.2%.
2. In 1983, the Reagan tax cuts were fully implemented. They reduced the top marginal income tax rate from 70% to 50%, and also cut the corporate income tax rate. The top personal rate was reduced to 28% in 1986. Average annual real GDP growth from 1983 to 1989 (the last year before the George H.W. Bush tax hike) was 4.3%.
3. In 2003, President George W. Bush cut the top personal rate from 38.1% to 35%, the dividend rate from 38.1% to 15%, and the capital gains rate from 20% to 15%. Until Democrats took over Congress in 2006 and announced the imminent end of these lower tax rates, real GDP growth averaged 3.0% per year.
There are two models at work here:
-- Keynesian Stimulus. The government spends taxpayer money on projects
to "create jobs." The only jobs that are created are in the sprawling
government bureaucracies. Because the government cannot spend any
money on the economy it did not first take from the economy, this
model cannot create economic growth. It failed in Japan and Argentina
in the 1990s, and right here in America in the 1930s. Economic growth
was stagnant or negative in all three cases. The government purely
and simply wasted taxpayers' money.
-- Growth Economics. When marginal tax rates on work, saving, and
investment are cut, incentives to produce more work, savings, and
investment go up. The Kennedy tax cuts worked. The Reagan tax cuts
worked. The Bush tax cuts worked. In all three cases, lowering
marginal tax rates caused economic growth to rise and for all
Americans to be better off.
How to Grow the Economy Now and Permanently
1. Cut the top personal income tax rate from 35% to 25%
2. Cut the corporate income tax rate from 35% to 25%
3. Cut the capital gains and dividends rate from 15% to 0%
4. Move to full business expensing of all business investments
5. Stop double-taxing U.S. employers on their income earned overseas
6. Kill the Death Tax
7. Kill the Alternative Minimum Tax (AMT)
8. Cut the payroll and self-employment tax rate in half, from 15.3% to 7.5%
9. Cap government spending to the pre-Bush level of 18% of GDP
10. Require full government transparency to ensure that taxpayer money is not wasted
Americans for Tax Reform (ATR) is a non-partisan coalition of taxpayers and taxpayer groups who oppose all federal, state and local tax increases. For more information or to arrange an interview, please contact John Kartch at (202) 785-0266 or at jkartch@atr.org.
Permalink: http://www.atr.org/content/html/2009/feb/020909pr-growing_the_economy_three_mo dels.html
Notes:
(1) http://www.imf.org/external/np/speeches/2002/071702.htm
(2) http://www.heritage.org/research/economy/bg2222.cfm
(3) http://www.gpoaccess.gov/usbudget/fy09/sheets/hist01z2.xls
(4) All real GDP growth figures in the successful models taken from U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts.
Saturday, January 24, 2009
FRC Condemns President Obama's $441 Million Bailout of International Abortions
/PRNewswire-USNewswire/ -- On the day after millions of Americans solemnly marked the 36th anniversary of the U.S. Supreme Court's Roe v. Wade decision that has led to the loss of an estimated 50 million lives, President Barack Obama took unilateral steps to expand abortion at taxpayers' expense.
In one of his first official acts as President of the United States, President Barack Obama rescinded the "Mexico City Policy." This policy prohibits taxpayer funds from going to foreign non-governmental organizations that use other funds to promote and perform abortions. Under the Mexico City Policy, funding for family planning is not reduced by one penny but recipient agencies must decide whether or not to engage in abortion promotion or provision. A policy against promoting abortion is only "anti-family planning" if one assumes that abortion itself is a method of "family planning."
Tony Perkins, President of Family Research Council, had this to say:
"Yesterday, President Obama issued executive orders banning the torture of terrorists but today signed an order that exports the torture of unborn children around the world. At a debate last year at Rick Warren's Saddleback Church, then-candidate Barack Obama vowed to find 'common ground' on the issue of abortion and that he, as President, would work to 'reduce the number of abortions.' His action today flies in the face of that vow and probably sets a record as the most quickly broken campaign promise ever leaving the question, how many more broken promises to families lie ahead?
"Both sides of the abortion debate, from Planned Parenthood to Family Research Council, agree on a simple economic point: when you subsidize abortion, abortions will increase. Thanks to his actions today, U.S. taxpayers will be forced to take part in exporting a culture of death. We have a responsibility to respect the policies and traditions of the other countries, which have laws recognizing the right to life of the unborn, and it is an insult to fund organizations that are intent on overturning those laws by promoting an elite ideology of abortion on demand.
"One of President Obama's first acts is to rescind this vital government policy and reward pro-abortion groups. This should serve as a bitter pill for those who campaigned for him, all the while proclaiming their belief in the cause of life and family."
In one of his first official acts as President of the United States, President Barack Obama rescinded the "Mexico City Policy." This policy prohibits taxpayer funds from going to foreign non-governmental organizations that use other funds to promote and perform abortions. Under the Mexico City Policy, funding for family planning is not reduced by one penny but recipient agencies must decide whether or not to engage in abortion promotion or provision. A policy against promoting abortion is only "anti-family planning" if one assumes that abortion itself is a method of "family planning."
Tony Perkins, President of Family Research Council, had this to say:
"Yesterday, President Obama issued executive orders banning the torture of terrorists but today signed an order that exports the torture of unborn children around the world. At a debate last year at Rick Warren's Saddleback Church, then-candidate Barack Obama vowed to find 'common ground' on the issue of abortion and that he, as President, would work to 'reduce the number of abortions.' His action today flies in the face of that vow and probably sets a record as the most quickly broken campaign promise ever leaving the question, how many more broken promises to families lie ahead?
"Both sides of the abortion debate, from Planned Parenthood to Family Research Council, agree on a simple economic point: when you subsidize abortion, abortions will increase. Thanks to his actions today, U.S. taxpayers will be forced to take part in exporting a culture of death. We have a responsibility to respect the policies and traditions of the other countries, which have laws recognizing the right to life of the unborn, and it is an insult to fund organizations that are intent on overturning those laws by promoting an elite ideology of abortion on demand.
"One of President Obama's first acts is to rescind this vital government policy and reward pro-abortion groups. This should serve as a bitter pill for those who campaigned for him, all the while proclaiming their belief in the cause of life and family."
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