Gingrich Plan Has Been Tried Before

In the debates for the Republican nomination for president, it is no accident that Newt Gingrich constantly invokes the name of conservative icon Ronald Reagan.  Gingrich continually reminds us that he was in Congress fighting for Reagan’s tax cuts and his military budgets in the early 1980s.  Naturally this is a calculated political strategy   on the part of Gingrich since the most faithful Republican primary voters are Reaganites.  But, the strategy is more than political; it is an indication of how he would govern if elected president.

According to Gingrich’s official campaign website, the former Speaker of the House of Representatives is essentially proposing the same program that Reagan foisted on America in the 1980s.  The key elements of which are huge tax cuts and military spending.

In terms of taxes, Gingrich’s plan would lower individual tax rates, lower the corporate tax rate from 35 percent to 12.5 percent and eliminate the capital gains tax.  Any lover of small government should love these proposals, however Gingrich never addresses how he would pay for the tax cuts.  On his site, he proposes no specific spending cuts and claims he will balance the budget by “growing the economy” through tax cuts.

For his part, Ronald Reagan based his entire economic platform to get the economy moving again on tax cuts.  He also claimed that lowering taxes would grow the economy and balance the federal budget.  After eight years in office he managed to triple the federal debt.  The problem with Reagan wasn’t that he cut taxes (he also was the biggest tax raiser in history to that point) it was that he didn’t cut spending.  He proposed cuts when he ran for president, but didn’t follow through on his rhetoric.

At least Gingrich is not being dishonest about his intentions not to cut federal spending, but his overall policy will have the same effects as Reagan’s – an enormous increase in the national debt.  Given that our debt has already reached a critical point, we can ill afford a return to 80s style economics; thus we can ill afford a President Newt Gingrich.

Gingrich is also proposing Reaganesque militarism if he is elected president.  Of course that is the path we have been on since the 1980s anyway.  He has no intention of making any military cuts a part of debt reduction.  In fact, according to his campaign website, under President Gingrich the U.S. would continue to be the world’s military policeman:

“America’s foreign policy must begin by understanding who we are as a country.  We are, as Ronald Reagan said, the world’s “abiding alternative to tyranny.” Therefore, America’s foreign policy must be to ensure our own survival and protect those who share our values.”

So while he proposes to cut taxes drastically and offers no spending cuts, he also would seek to at the very least keep spending enormous amounts of money on military adventures that don’t contribute to our safety and security.  In fact, by defending Israel unconditionally his policy would make us much less safe.

There is no doubt that Ronald Reagan’s legacy is still very much with us today.  Indeed, Newt Gingrich has co-opted the Reagan governing plan as his own.  It is a simplistic plan that set us on the road to an astronomical national debt.  We are currently at a breaking point with that debt and all Newt Gingrich can do is propose more of the same?

Your Vote Didn’t Count last Tuesday

Did you really think it was worth your time to vote last Tuesday?  Oh, Republican partisans will of course say an unequivocal “yes” as their party “shellacked” the Democrats and in the process picked up several Senate seats, governors’ mansions, and control of the House of Representatives.  But in actuality within 24 hours of the Republicans coup d’état all those Tea Party voters and others who crave small government had their votes negated and their victory smashed. 

How?  To begin with, South Carolina Senator and Tea Party Kingmaker Jim DeMint admitted on John King’s State of the Nation on CNN that Republicans will support raising the debt ceiling currently at $14.3 trillion, but only if massive cuts are included with the vote.  Ah, Senator, there is plenty to cut in the budget that will make raising the debt ceiling unnecessary.  How about ending our quest for World Empire by ending foreign occupations, closing down bases, and bringing our troops home?  How about abolishing the Energy, Commerce, and Education Departments for starters?  How about rescinding the balance of Obama’s “stimulus” program and ending corporate welfare as we know it?  Just these moves alone would save over a trillion dollars.  If there was ever a time for Republicans to be gutsy it is now.  They are riding a wave of voter anger unprecedented in our history.  They have a mandate from those same voters to cut, eliminate, and abolish anything and everything in the way of a balanced budget.  But within 24 hours of their mandate DeMint is already cutting deals on federal spending.

Jim DeMint aside, the biggest negation of the voters’ wishes on Tuesday came on Wednesday.  The Federal Open Market Committee (FOMC) of the Federal Reserve Bank announced that it would begin a new buying spree of between $600 and $900 billion of U.S. Treasury bonds over the next 10 months. This so-called quantitative easing is necessary according to the FOMC because, “…the pace of recovery in output and employment continues to be slow”.  Thus the Fed must step in, purchase Treasury Bonds from banks so the banks in turn can loan that liquidity to businesses to get the economy moving again.

You see Congress and the president are not the only big spenders in Washington.  The Federal Reserve also exercises the power to essentially spend our money through monetizing government debt.  Thus, on the very day voters across the country were saying no more reckless spending and voting spendthrifts out of Congress the unelected Fed decided to usurp the People’s power by deciding to spend hundreds of billions of dollars to purchase Treasury bills from member banks.

Based on past experience, here is how the Fed’s spending spree will work.  The Fed will create between $600 and $900 billion of liquidity (dollars) out of thin air.  It will then use that liquidity to buy up massive amounts of Treasury bonds from the big banks.  The banks are supposed to use the proceeds from the sales to make new loans and to get the economy moving again.  Keep in mind that what the Fed is about to do, it has already done in the not so distant past. Beginning in March of 2009 the Fed injected about $2 trillion into banks to buy up toxic assets.  Precisely at that time, the S&P 500 stock index bottomed out after falling by 57 percent from its historic high.  Since the Fed began that round of “quantitative easing” in March of 2009 the S&P has rebounded a remarkable 80 percent.  With the economy still stuck in a deep sewer there is no reasonable explanation for the sudden, renewed health of the stock market except that Wall Street invested their Fed funds in themselves instead of in Main Street.

And that is what banks are going to do this time as well.  It is bad enough that an unelected central bank has the power to print our money like crazy with no Congressional restrictions placed on it, but to give it to the big banks without any stipulations like they have to make loans or face penalties is just plain criminal.

Look, our political and financial systems are corrupt and rigged.  They make a Mafia bookmaker look honest.  Think of it like a happy love triangle between Congress, the Fed, and Wall Street.  To protect itself politically Congress has contracted out management of our money supply to the Federal Reserve.  In return, the Fed prints money out of thin air to support Congress’ deficit spending which ensures its high reelection rate.  The Fed supports big banks by loaning them our money at very low rates.  It bails them out when they don’t have enough reserves to meet obligations.  It allows fractional reserve banking whereby banks are guaranteed solvency by the Fed even though they loan out up to 90 percent of deposits on their books.  The final link in the cycle is the contributions given by Wall Street banks to members of Congress.  We’ve heard DeMint, McConnell, Cantor, Boehner and other Republicans decry the deficit spending of Democrats but when have we ever heard them decry the Federal Reserve?  Never.  There is a good reason for this:  the Fed is their meal ticket to reelection through the financing of deficit spending and campaign kickbacks from Wall Street.

This whole rigged system has been destroying our standard of living for decades.  By adding more dollars to a low producing economy the value of our currency will continue to deteriorate and prices will spike.  Previous “stimulus” spending of Congress and quantitative easing by the Fed has already caused commodity prices to rise hugely in the last year:  Agricultural Raw Materials up 24%, Industrial Inputs Index up 25%, Metals Price Index up 26%, Coffee up 45%, Barley up 32%, Oranges up 35%, Beef up 23%, Pork up 68%, Salmon up 30%, Sugar up 24%, Wool up 20%, Cotton up 40%, and Rubber: 62%.  You get the idea.  Imagine price increases after this next round of easing.  But don’t worry, because the Fed’s member banks will know when to pull out of the stock market before it busts.

At the end of the day, if you voted for smaller, less expensive government last Tuesday your vote was negated by the unelected economic central planners at the Federal Reserve.  It took the FOMC just 48 hours in closed door meetings to undo what candidates across the country spent billions of dollars on in the last year to achieve on Election Day.  What a pity since you thought your vote was really worth your time.

Article first published as Your Vote Didn’t Count Last Tuesday on Blogcritics.

Republican Proposals Reaffirm the Party’s Commitment to the Failed Welfare/Warfare State

In an attempt to emulate the electoral success they enjoyed in 1994, House Republicans presented their version of the 1994 Contract with America this past week.  The new document tagged “A Pledge to America” details in its 48 pages the legislative agenda House Republicans will pursue if elected to a majority this fall.  Among the worthwhile proposals put forth in the document are repeal of Obamacare and the immediate cancelation of all unspent stimulus funds.  Beyond that, the Republican’s campaign platform lacks creativity and courage, favors special interests, and reaffirms the Republican Party’s commitment to the failed welfare/warfare state.

Of course, no Republican agenda would be complete without the standard proposals for tax cuts.  If the Republicans take the House they promise to renew the Bush tax cuts and give small business owners “a tax deduction equal to 20 percent of their business income.”  Now, tax breaks are always a good thing because the private sector can allocate money way more effectively than government, but the Republicans really need to branch out from their uncreative, politically popular tax cut proposals if they are really serious about turning the country around.  What good is more money in your pocket if the cost of things continues to rise?  How about proposing a new monetary system to replace the Federal Reserve’s?  How about proposing one that serves all the people not just the banks?  Maybe we could get one that puts real restraints on the spendthrift tendencies of politicians?  You know, one that provides a sound currency, backed up by a scarce commodity, which would ensure real price stability not the type the Fed provides now where prices increase over time to benefit corporate America.  But, House Republicans dare not propose that because their benefactors on Wall Street would get upset and they themselves would be negatively affected because they wouldn’t have the Federal Reserve around to monetize all their deficit spending.

Next up, House Republicans are pledging to alleviate the burdens of federal regulations on business.  The idea is if regulations are light businesses will prosper, hire, and our economy will return to full health.  You can’t beat that logic.  But, Republicans draw a line in the sand.  Under their “Pledge”, they will only require “congressional approval of any new federal regulation that has an annual cost to our economy of $100 million or more”.  What is so special about $100 million?  Is that the monetary threshold where regulations are most effective in protecting special interests by hindering new players from entering a market while at the same time minimizing the effect on the profits of the same special interests?  It is bad enough that most federal regulations on business are unconstitutional.  At the very least, Congress should approve all regulations.  But if Republicans were really serious about producing a prosperous economy they would talk about repealing onerous regulations which stifle competition and only serve narrow special interests.

Their proposals to “stop out of control spending and reduce the size of government” in “A Pledge to America” are so ridiculous it is embarrassing.  House Republicans want to cut government spending to “pre-stimulus, pre-bailout levels”.  This, they claim, will save us $100 billion in the first year and put “us on a path to begin paying down the debt, balancing the budget, and ending the spending spree in Washington that threatens our children’s future”.  Question, weren’t we on a spending spree pre-stimulus – pre-bailout?  In the seven years preceding the stimulus and bailouts didn’t a Republican president and Congress increase the national debt by $5 trillion – almost doubling it?  I don’t understand how a mere $100 billion is going to help us eliminate a deficit that could be $2 trillion this year?  This proposal is a joke.

And in a real sign that they dig the welfare state, House Republicans are pledging to “reform” Fannie Mae and Freddie Mac.  They will end the government takeover, shrink their portfolios, and establish minimum capital requirements.  Again, Republicans claim their proposal will save the taxpayer money – as much as $30 billion.

However, according to the Congressional Budget Office, the government bailout of Fannie and Freddie could swell to $400 billion and if housing prices continue their downward trajectory costs could hit as much as $1 trillion.  In light of these massive losses for taxpayers, Republicans must be joking when they boast their reform proposals will save a mere $30 billion.  They sound like Democrats.  If Republicans want to renew American prosperity they should privatizing both Fannie and Freddie, end the implicit guarantee of federal bailouts, and let the free market handled mortgages.

Lastly, under their leadership the House Republicans promise that the warfare state will be safe and secure.  Well, they don’t say that exactly.  They cloak their speech with emotional words in an effort to make opposing them an unpatriotic act.  Instead they say, “When asked to provide our troops with the resources they need, we will do so without delay”.  So, does that mean Republicans are willing to give blank checks to the military industrial complex?  If it does, the Republicans will be spending all of their proposals savings and then some.  More importantly, as the party of war, how many more conflicts will they get our troops into?

A Pledge to America is a wonderful reminder of why the American voters rejected the Republican Party in 2006 and 2008.  Economically, all they really offer are tax breaks.  In foreign affairs, they offer more war.  If they are so concerned about restoring American greatness, they should be proposing: reform of the monetary system, huge cutbacks in every federal department and agency, and closing down bases and bringing the troops home to defend America.  But, it seems the Republicans lack the creativity and courage to do that.  They prefer instead to favor special interests and recommit to the failed welfare/warfare state.

Article first published as Republican Proposals Reaffirm the Party’s Commitment to the Failed Welfare/Warfare State on Blogcritics.