A Modest Agenda for a New GOP Congress
Let’s engage in some thought experiments. November 2 is less than a week away. The GOP is widely expected to take over control of the House of Representatives and has a decent chance at winning over the Senate. What might happen to the economy when this occurs?
The economy, while unemployment is way up, is not in a complete shambles. There is business activity underway. In the wake of the financial meltdown in 2008, most companies that survived have restructured and become, if not as profitable as they had been, at least are hanging in there.
Consumers, while having new-found thriftiness thrust on them, are beginning to spend discretionary income. Part of our practice follows the restaurant business and we’ve noted that much of the casual sector is beginning to show a bottoming out of same store sales over last year (coming, of course, from a very low base), and in some cases, seeing improvements, suggesting that consumers are loosening up a little bit.
Money center banks have recapitalized to shore up balance sheets following the mortgage meltdown. Most large lenders have raised fresh, albeit dilutive, equity over the past couple of years and have repaid TARP money taken down in late 2008. There is a current crisis in foreclosures that will further threaten profitability, but it is reasonable to believe that most banking institutions have adequately, if not over-reserved for bad loans in both residential and commercial real estate loan assets.
If there is a dark and unknown cloud on the horizon, it is that the other shoe hasn’t yet dropped in commercial real estate; look around you: there are plenty of boarded up storefronts begging for tenants. On a tony street near where I live, over 20% of the retail space is looking for new tenants. Many commercial loans are coming due over the next several years and lenders don’t have significant leeway to renegotiate these loans without an infusion of fresh equity that isn’t likely to happen. There is credit available for businesses, but it is credit that will be available only if it is secured by solid collateral.
Uncertainty is the biggest drag on the economy: Uncertainty with taxes, uncertainty with cap-and-trade costs, uncertainty due to Obamacare costs and regulations and general uncertainty surrounding an administration that seems hell-bent on punishing success and imposing costs and regulations on businesses of every size. This is what’s really harming employment decisions: after all, why should a business owner, making hard-nosed business decisions, want to hire without knowing what it will cost? Moreover, there is equity and quasi-equity capital to fund growth, but it will be on strike until the political class provides consistency and clarity.
What should the GOP do if it is able to capture one or both of the Houses of Congress in November’s election? I’ve laid out a case by saying that many fundamentals of the economy seem to be in battered but sound shape, and that there are basic policies a new Congress will need to put in place to help the economy begin to grow in a more robust fashion.
First things first: policymakers will need to create an environment in which businesses can operate with certainty that the rules aren’t (a) either ill or undefined, and, (b) subject to massive sweeping change (e.g., tax increases and cap-and-trade), and, secondly, roll back spending at the Federal level. Several other things can also be done that will help as well: Obamacare must be repealed (although little support will come from the administration) and market-based solutions should be enacted. Furthermore, signals to the states that no more bailouts are forthcoming will force states to confront their giant funding problems.
Congress can’t force the Fed to take anti-inflationary action or curtail dramatic quantitative easing (e.g., running the printing presses) or buying bonds (a direct violation of an independent charter), but it must force accountability rules on the Fed (audits, etc.) and bring about more transparency.
If the lame duck Congress doesn’t address it, HR1 should be an extension of the Bush tax cuts for at least another five years, if not permanently. Penalizing success has become a great left-wing standby that the polity rejected years ago as antithetical to realization of the great American dream. As JFK, Reagan, Bush 2 and countless countries around the world have understood, low tax rates promote capital formation, investment, and, ultimately, jobs. Assurance of a continuation of low tax rates will rapidly grow Federal and individual state tax revenues from higher overall incomes, consumption and investment. In the long run, Congress should consider a complete overhaul of the tax system to a flat tax.
Don’t count on any of that. Not only will Obama wield the most vigorous veto pen in the history of the Oval Office, the GOP Establishment will retain sufficient sway no matter what the election brings to thwart the overwhelming majority of small government / low tax initiatives emitted by the newcomers.
Remember that an establishment — any establishment — is devoted first and foremost to remaining established.
Francis, if the Establishment stays established, then what we think is a bloodbath in 2010 will look like a pinprick in 2012. The polity is aroused and is very, very angry. It may be that Obama will wield a veto pen. Then it will be interesting to see if enough Dems that didn’t get wiped out this time around are willing to continue standing on the decks of the good ship Obama or will vote to override. It all depends on the size of the message next week.
“If Congress is successful in rolling back spending and limiting further growth insofar as the national debt is concerned, and, if Congress succeeds in extending the existing tax rates, several good things can happen.”
That’s a big “IF.” We all know it needs to be done and, hopefully, the new Tea Party members will have the backbone to make sure the rest of Congress will go for it. The problem is Obama. He will undoubtedly veto any major reductions because it will represent a stake in the heart of his beloved social-welfare state. Congress will then have to have the courage to override the veto. Does it have the votes to do that? Maybe, if the Republicans can convince the Democrats that their political futures depend on them overriding the veto, enough Democrats will join the Republicans to override the veto. It all depends on how much the Republicans win by on November 2nd. If the Republicans win really big, then it will prove to the remaining Democrats that their jobs are on the line if they don’t reduce the spending. It could just work. Actually, it has to work if we don’t want to go broke.
I would add that Congress not pass any new legislation until such time that this 112th Congress starting in January go thru and repeal all laws that are useless have no real meaning to the general public and do nothing laws including the pensions of members of Congress and there aassitance who actually write the laws Congressional members eventually pass thru Congress. It’s time to clear the books so to speak where Congress should impose such rules that no house will pass any mroe boondoggles like the Omnibus bills, Obama Care that had over a 1,000 pages of BS and some that had 1,000′s of pages of useless legislation !! Our Constitution is only about 19 pages long, why then should Congress write any law(s) that contain more than what our Constitution has and where by no one in Congress reads the bills such proof is the latest boondoggle HC.
Congress also needs to be the first in a series of cuts to themselves to show the American People are dead serious and that it anything Congress passes as legislation that Congress will be required to abide by those same rules/Laws, and to remove there obnoxious pay, if there not in session they receive no pay just like all Americans do where they not working they receive no pay why should they, and why should they be afforded such great pensions that we should not have to pay for and it starts with the POTUS where by being President doesn’t mean your paid your regular salary for the remainder of your living days when Americans can not work for 4 or 8 yrs and retire on what they were paid for the rest of there life, it makes no sense and it should also include members of Congress. Granted it would take some time but these issues are tops on the minds of most all American’s when we work just as hard if not harder than those elitist who sit on there asses daily not even breaking a sweat !!!
Cutting departments is good. Repealing the laws which give them a reason to exist is better. Our bureaucrats are too numerous and overpaid, but just cutting headcount is not enough. If you don’t remove the reason for the position in the first place, you make our interminably slow regulatory state even slower. AND you provide an incentive for corruption – want to go the head of the line? Great, how’s about some consideration, etc.
Further, and the House and/or the Senate can do this on their own by virtue of how they write legislation – “No regulation without an open vote in the Congress.” No more rule-making by agencies. At all. No delegation of what are clearly political decisions to unelected government employees.
The simple thing to do is to pass a host of mini-spending bills where each one funds and spends for a very specific “essential government” area. Keep a count down/comparison counter of spent versus revenue. When the spent equals the revenue, the issue must become “is this important enough to force our children and grandchildren to pay for it?” along with the answer of “there’s not enough rich people in the universe to pay for everything anyway.”
Thanks for this insightful article….Since I live in Texas, I have reason to be concerned about the after-November 2 actions of Congress.
Texans who are reading the news know if Obamacare isn’t stopped, the costs of expanding Medicaid will destroy the low tax climate, since free medical care under Medicaid and federally mandated requirements in education are the two elephants in the state expenses. Even worse, the EPA is threatening to shut down refineries, power plants and the petro-chemical industry in Texas (the supplier of 20% of the nation’s energy), as well as stopping the new technology used in producing natural gas……This is even more devastating than Jimmy Carter’s destructive ‘windfall profits tax’ which cratered Texas and caused all the major energy companies to leave.
My modest requirements would be:
1. Defund NPR
2. Pull out of the UN
3. Build the damned fence
4. Repeal ObamaCare
5. Look at the White House / Senate travel budget and cut it by 80%
That should be sufficient to keep them busy for the first couple of months.
Consider an across the board cut as a start. This would have broad appeal and would limit the ability of the dems and their msm allies to demonize conservatives for “wanting to starve children and old people” if they try to cut specific programs. By making it across the board (defense too – don’t forget they’ve got as much bureaucracy as any other dept), it helps us fight the public relations battle and would put great pressure on obama to sign the bill.
Getting rid of specific stuff – I won’t comment on Obamacare – enough people will go after that – but I’d like to lay out a strategy to get rid of a lot of things – a strategy I call “consolidation” and will take some time to come to fruition. I think we’ll never win a straight brute force fight to get rid of some things – too many forces will align against us, and without the presidency and a supermajority in the senate, it won’t happen.
I’m going to use the Dept of Ed as an example, but this could apply to many depts.
Step 1 – Get rid of the Dept of Ed by proposing to simply take that $50B and distribute it to the states for education – no strings attached. You even increase the amount a bit. You make the argument that it will go directly to hire teachers instead of being spent in DC on bureaucracy and consultants. You drive it as directly as you can to the local school districts to spend themselves. Let’s see the dems demonize that! They’ll try of course, but you will seem so much more reasonable for wanting to hire more teachers.
Step 2 – Once you get a bunch of these “direct distributions” in place, you start consolidating them into a single distribution. That way, you can control that spending now that it’s been disassociated from a specific program – its become just a state grant. Start phasing it down over time, letting states know that they’ll have to raise their own money in the future.
Congratulations, you’re a redistributionist AND a collectivist. What will the boys down at the lodge say?
That Republican strategy has been clear all along: Do nothing and take credit for any improvement. Do nothing and blame Obama for any difficulties. Either way, do nothing, just like you’ve been doing for the last four years. Now THAT is governing.
You mean Republicans who opposed the stimulus, voted against it, claimed it has failed without citing any stats and then subsequently TOOK THE MONEY and SHOWED UP AT THE RIBBON CUTTING CEREMONIES to gleefully remark about how this money will create jobs in their states? Yeah, that happened.
LMAO – without intending to, Sensei actually offers good advice. It’s simple and will be a more effective way to improve the situation than anything obama and the dems would do. Learn from the hippocratic oath – first do no harm!!!! If doing nothing would only accomplish that, we’d be a lot better off.
You almost got it right . . . according to the latest directive to the Koch Suckers, “Conservatives shall exercise the Hypocritic Oath – first, do no thing.”
Stick with doing nothing. No imagination. No courage. No passion. No commitment. That’s your strength.
imagination can be overrated! but courage and commitment are certainly valid – and certainly patience! If only the bi-partisan geniuses in the 30s hadn’t taken such actions when unemployment was only in the 6-9% range and thus brought about the full extent of the 10year great depression – read the wise words of Thomas Sowell – http://townhall.com/columnists/ThomasSowell/2010/10/27/brass_oldies_part_ii.
Sowell is a communist hack.
I do like the idea of freezing spending at 2008 levels and an across the board cut. The Brits have struck a similar deal with an 8% cut to social and defense programs. You couple this with a balanced budget and it is a good start. Once you have that heavy lifting taken care of then you slash whole departments and refund their budgets to the taxpayers. As suggested the department of education, but instead of giving to the states or locals to waste why not give it to the taxpayers who it belongs to? This would encourage those who actually pay taxes to allow additional cutting to occur becuase the reap the immediate benefit to their wallets. Once you finished slashing useless departments and refunding the windfall, then you work on the national dept by having a national sales tax of 2% that is solely for the reduction of the national debt and sunsets with the debt. Then you implement a flat tax or a head tax, so this can never happen again because everyone would pay taxes and therefore have skin in how it is spent, vice 50% of people that pay nothing and expect government services.
As a side note, slash the corporate tax to 5% and see how many companies come to America with it’s cheap land and skilled workforce. You have to make it profitable to do business here if you wants to create jobs in America, taxing the crap out of the big bad companies has only made them take their jobs elsewhere.
There you have it, just some easy things for the next Congress to take care of to put America back on the right track, but sadly none of it will ever happen or at least not for another 27 months.
Sandy: much of what you say makes sense. But, cutting whole departments (Education??) won’t do a whole lot. Other than interest being paid on the national debt, the large bulk of the federal spending is concentrated in four areas: defense, social security, medicare, medicaid. Not much will happen without appreciable change in those four program areas. It can be done without screwing seniors and leaving us open to foreign terrorists.
A flat tax makes a lot of sense. But only unless ALL deductions except one are eliminated. I would support a deduction for charitable contributions; maybe up to $5,000 for a single filer and up to $10,000 for couples. Of course, try to get the realtors and homebuilders to agree to elimination of the mortgage interest exemption……..
I agree that cutting wasteful departments doesn’t get at the true red meat of the matter, but by cutting them and giving the money back to the taxpayer makes the cuts on the meat a little easier to take. Plus we have to look at what those four programs are truly for and whittle them back to the basics.
As for the flat tax, it is all about everyone paying the exact same regardless of social economic status because it is to support America not punish success or reward trickery. My idea would be say $2000 a year for every adult, plain and simple. That also sets the federal budget and can’t be changed without 3/4 of the states agreeing. This would make it very hard to be wasteful and people would be extremely interested where their money is going. People today don’t really care as much as they should because they feel it is the rich people’s money that is being wasted, but if it was theirs then they would take a very hard look at where it is going.
If you aren’t wasting it on the dept of education then maybe you pay for a new submarine or if you aren’t paying the dept of energy to tell us we are more dependent on foreign oil then when we started then maybe grandma gets a new hip. If we can’t afford lots of entitlements then maybe all those able bodied people could cover their own expenses vice expecting the government to do it. I say we have private retirement accounts (maybe backed by some government guarentee) for all young people, so that social security is only for those who truly need it vice the snow bird set. I love old people, but work for 30 and retire for 30 isn’t a good deal for solvency.
I suggest that you should look at GDP growth decade by decade from the 50′s through 2010…For the 50′s 60′s and 70′s GDP grew over 3.3% per decade since then we haven’t broken 2% in any decade…what happened in 1980 to change this..Tax rates reduced to 36%..A coincidence..I think not..
#1 – repeal Obamacare. Let the moron veto it many times.
#2 – pass a budget at pre-2008 levels. Let there be gridlock. Shut the government down if the criminals don’t cooperate.
#3 and probably most important; shine a bright light on everything the criminals in the white house do, and everything the criminals in the last congress did.
Don Obama doesn’t need new legislation. He will simply escalate his secret illegal dismantling of the country by executive order and by using the criminal bureaucracy. If it isn’t stopped, there will be no 2012.
“shine a bright light on everything the criminals in the white house do, and everything the criminals in the last congress did.”
I’m all for it, provided you go back to 2000. Now that’s a fair deal, which is why you won’t agree. I get more challenge reading TV Guide than your drivel.
I am not an economist, but it seems to me that the only reasonable way out of this mess is to grow the economy, or rather unleash it. Looking back at technological progress over the last 30 years, it is a wonder that we are all not much better off than we are. It is obvious that the dead weight costs of government is gigantic. Technology and human dynamism are being pissed away by crooks and scoundrels.
Reducing spending is a must, but so is deregulation and it doesn’t really cost a dime. We have all the tools to fix this mess, but now is the time for our “leaders”, in government, crony capitalist businesses, and big entitled special interest groups, to shut up and get out of the way. I advocate sending them to a lunar penal colony – it seems to have worked for Australia. A few generations of hardship should help to dilute the malice and addled thinking. They will be allowed to return to earth when we all can live like the Jetsons. Damned if they get flying cars before the hard working honest people of the planet.
You make two great points. With the pace of technology change, we should be much wealthier than we are. And cutting back stupid regulations is free.
But growing isn’t the economy isn’t the only way out, and we shouldn’t depend on it. Why should government be massively bigger than a decade ago? It’s loony. Government doesn’t do anything but regulate and count (excluding national security, of course).
All we have to do is dramatically cut government and cut regulations, and the system will heal itself. And fairly quickly, SS and Medicare have to be adjusted to fit modern demographics rather than 1930′s and 1960′s demographics.
They just want us to think its complicated. But then, they have a stake in the freak show, don’t they?
proreason, I like the cut of your jib. Growth won’t get the job done completely and unless we slay the beast in Washington it would just result in more wasted tax dollars. Let the market decide!
To clarify, I am not proposing to grow the economy to sustain a bloated government and all the hangers-on. I just believe that the first priority should be for government to get the hell out of the way and let the economy go and grow. Then government can fix itself which involves a lot of hard political choices. That will be when the real battle begins in the hearts and minds of the citizens. This economic unleashing is necessary but not sufficient for us to turn this ship around.
This is triage – this is getting close to an emergency. And when people see the economy growing with less government intervention, it will become easier to further reduce government spending and activity. We are on the same page – we are simply discussing technique and priorities – not principles.
John, the only way to get out of the debt bomb that has been set and lit is to grow the economy sufficiently to retire it. The only way that I see that will happen is if the government gets out of the way. Reducing the size of government is a great idea and I think one which time has come, but let’s not delude ourselves that it will be very easy to do. It will also save money that can be earmarked for principal retirement, which I think is the very best way to sell it to the electorate. But, because of how difficult politically it will be to do in the short run (remember POTUS has a veto and is likely to use it), the best way in the near term is to grow our way out of debt: the best way to that is to reduce taxes and pare back regulations and intrusion. The electorate gets that also.
“let’s not delude ourselves that it will be very easy to do.”
We have to stop saying this. It’s flat out wrong and plays perfectly into the hands of the marxists.
It’s only hard because they make it hard.
I’m not going to go through the issues one by one, but just consider the deficit for starters. It’s really simple. We just go back to 2004 or 2005 spending levels. Yes, Social Security and Medicare are separate (and large) problems (though not hard to solve either), but for everything else…what on earth are we getting for a 40% expansion in federal services. Nada, that’s what, unless you count increased dependency on government as a benefit. For starters, save $400M immediately by revoking the Stick-it-to-us that hasn’t already been flushed down the toilet.
Obviously, I’m not considering the “hard” task of overcoming the adolescent progressives….but I don’t think you are either.
We have to say as clearly as possible that the problems are only “hard” because the marxists make them hard. Give the adults the keys to the car, and every problem on the books can start on the path to solvency in very short order.
The question, is can we trust the Republicans to abandon business as usual? I, for one, will be watching what they do with earmarks. If they can’t eschew their earmarking practices, then they can’t be trusted. No earmarks for either party. There is nothing you can do with an earmark which you can’t do with an appropriation, if it has merit.
Let’s put it like this. If the GOP doesn’t deliver on the meager “Pledge” at the very least, there is gonna be hell to pay. If Boehner thinks that the Tea Party is gonna go away in Jan 2011, he is VERY mistaken. We are angry, enraged and getting madder.
The worst mistake the GOP can make if they find themselves in a majority is to fiddle around with only a bandaid approach to the symptoms of the real underlying problems.
Here’s a couple of smokescreens being ignored.
America no longer has all it’s cumulative traditional economic bases to support the needed employment for todays government revenue, spending and debt liabilities. There is NO returning to the arbitrary and unsustainable economies of the “Bubble” era. All the rhetoric of the GOP and the other parties is restoring the economies of the bubble era. This is dishonest rhetoric at best!
Wall Street has long abandoned the fundemental principles of valuing business and the economy. Following Wall Street as an indicator of the health of the economy is a futile and dishonest approach today. The sad “fact” coming from Wall Street right now is, that without all our traditional and “bubble” economies, a workforce representing about 17% unemployment, can sustain itself at the current value of good and services.
All the rhetoric of restoring America and its economy via some perceived “fiscal displine” policy is simply hogwash!
The real solution for the GOP is to seek a constitutional amemendment (commerce clause) narrowly defining and reducing the federal governments authority to regulate the States commerce and trade. Then go to work repealing truckloads of legislation that has systemically destroyed America’s traditional economy over the past several decades. Goodbye BIG federal government, socialists and labor unions! You’ll be replaced by common sense de-consolidation and centralization legislation and, leaving to the State all labor issues. Welcome back home America’s traditional economies and ingenuity!
Most all America’s problems would begin to go away with this single Constitutional Amemdment. Nearly “every” facet of the federal governments abuse of authority and growth has come via the abuse of the commerce clause. It also has been the single most important tool for socialist advances in this country.
Reasearch it and think deep about it!
Dont forget…
Redistricting Reform in the State Legislatures. End Gerrymandering now.
Start out with any and all easily passable/populist type reforms. It will keep the dems marginalized and simultaneously diffuse the aggressive media fear-mongering about republicans that has been being prepared for months and will soon be deployed.
However, what I think will happen is the Republicans will become divided, the media will exploit it, and conservatives will eventually leave to create their own party.
Well, it looks like the repudiation was complete in the House and people just couldn’t bring themselves to elect candidates in which the messenger was able to be demonized. However. All the signs, so far, are pretty good, other than Mitch McConnell negotiating with himself. If he plays it right, he’s actually going to have working control of the Senate because so many red state Dems will be up for reelection in 2012.
Let’s not kid ourselves. The main goal of the next two years will be for the House to pass stuff that the Senate may or may not take up but to show clarity to the electorate of what is possible when a different man is in the WH.