If the Republican Party is to reassert its political relevance following the wasted years, 2001-2010, it will necessarily have to refocus its policy agenda to the pursuit of traditional Republican goals – limited government, private property rights, individual freedom and the rule of law. This will take considerable effort and discipline, given how far the party has strayed from these objectives since the departure of Ronald Reagan from the Presidency and of Newton Gingrich from the House Speakership. It will also take the immigration of some real intellectual horsepower into a party that is sadly handicapped in that dimension. Fortunately, the Democratic Party is self-destructing into the creation of unsustainable debt and impending stagflation, opening up a real entrepreneurial opportunity for a return to free market triumph from 2012 onwards.
I do not view myself as a political entrepreneur, indeed I have no experience in that role. Nevertheless, drawing on my many years of experience as a leading scholar of public choice and as a classical liberal who helped to bring Margaret Thatcher into office in Britain in 1979, let me advance, in broad-brush terms, a potentially attractive budgetary contract with America, that might provide a starting point for electoral success in 2012.
The center-point of the contract is the elimination of all federal budget deficits within the four year presidential term, 2012-2016. Thereafter, the goal would be the achievement of budget surpluses sufficient to draw down the national debt to no more than 30 per cent of gross domestic product by 2020. These goals must be achieved without recourse to inflation in excess of 2 per cent per annum. These goals must be realised without false accounting (i.e., by placing all entitlements fully on-budget).
Such a program of budgetary tightening will require significant cuts in federal expenditures, reining them in to no more than 20 per cent of gross domestic product. To achieve such a budget cut will require revisiting the fundamental role of the federal government, eliminating its excursions into production, reducing its regulatory role, decentralizing many activities to the states, and requiring full funding through taxation and through targeted cuts in its transfer programs. It will require significant job attrition and real salary and benefit cuts for federal employees. It will necessitate raising the age for accessing social security and medicare benefits to reflect increases in life expectancy.
Even with such spending cuts, federal taxes will have to rise somewhat to meet the expenditure targets. My suggestion is that the Republican Party should investigate a fundamental reform of income taxation, providing a flat income tax solution, without exemptions, with a negative rate for households operating at below the poverty level, sparingly defined. Presumably, such a flat tax, in combination with the payroll tax, if that is retained, will have to raise federal revenues slightly in excess of 20 per cent of gross domestic product in order to reduce the long-term debt to GDP ratio. With the flat tax, the burden would be shared proportionately across all earners, rather than discriminating sharply against the most productive members of society.
Such a radical reform in budgetary policy can be sold to an electoral majority in terms of its positive implications for economic growth and its protection of the international reserve status of the dollar, as well as in terms of fundamental fairness and transparency. To do so, however, requires intellectual horsepower of the highest order and an ability to explain the underpinnings of free market economics at a level beyond the capacity of any practising politician in the United States.
Trauling for such leadership is a pre-requisite for a return to free market triumph in 2012. In an educated population the size of the United States, surely there is a vein of such talent available for discovery. If not, then the drift to progressive socialism will not be stemmed and reversed, but rather will continue until the Red Revolution is complete.
Tags: federal budget balance, implications for economic growth, implications for individual liberty, protecting the international reserve status of the dollar, public expenditure cuts, the flat income tax, true accounting
March 29, 2010 at 3:16 pm |
Though I agree in principle with the flat tax concept, I’m at a loss as to how to deal with the transitional chaos surely to develop with things like real estate values as it relates to all the deductions, both for primary residence and especially the investment side.
How might that be handled? Keep up the good work. You’re a beacon of common sense in the darkening house of ignorance.
March 29, 2010 at 4:12 pm |
I agree with BawldGuy.
I do not see any way any political party or candidate can deliver on government cutbacks. I’m sure many will promise – like they all have for the last 150 years – but deliver? I cannot see how (without causing political collapse)
There are simply too many hands in the pie to take the pie away.
One can argue that an attempt has to made any way, since if the attempt failed, the nation would end up fractured and shattered anyway. When any path leads to the same end, any attempt to change the path may make sense IF and only IF there exists a possibility of success. Futile change is worthless and dangerous because it distracts.
As I cannot see any possibility of success, I say that the People must focus on the consequences of the terminus. Solidify community and family and work to be come wholly independent of any political force beyond 100 miles away.
March 29, 2010 at 6:33 pm |
All very sound ideas, including flat tax – which a number of countries have implemented very successfully (and without major transition problems) in recent years. However, it’s clear there is no political will for the kind of reforms that might enable a return to free market economy.
Aside from a lack of suitable political leadership we have a problem with the electorate, a very significant portion of whom have been too indoctrinated with statism and progressive socialism to accept a return to old values. Equality (of outcome), “fairness” (ie steal from the “rich”) and dependency on state/welfare are far more convenient, and free markets won’t deliver that.
It would therefore, I’m afraid, appear more likely the US is heading down the road the UK and much of Europe have already traveled. And once at that point, the only hope for a reversal is after the entire system has collapsed, which it inevitably will in the near future, not because of political will but for simple economic reasons.
March 29, 2010 at 7:33 pm |
More to the point, they can deliver cutbacks but it will be painful. Using the Greek example, announced cutbacks often bring strikes, anarchy and chaos from those being affected, especially if unions have a lot of power.
This is also the Australian experience where the unions will go on strike for the slightest thing.
What is troubling is that with this particular Administration unions are gaining a lot of power, and through the devious late at night back door recess appointment a union lawyer who favours card check is in a position to impose his will on the USA.
It will take a lot to clean up the mess that is being smeared over all the walls in the USA (please use analogy of baby dumping in his nappy or diaper to understand my meaning here).