A Republican alternative “Tax Cut”

The Republican leadership is stupid. 

Don’t get me wrong, they are largely nice guys… nice, but stupid. 

I recently read in a British journalist’s article how he sat down with Mitch McConnell (Republican Senate Leader) and talked about the new “Frankenbudget” that the administration has managed to get passed. 

(That’s “Frankenbudget” as in; “It’s alive! It’s Alive!”)

McConnell was apparently unaware that private voting for union members was a central provision of the UK’s successful Thatcherite labor reforms. You know, the reforms that turned the country around from something resembling a tottering soviet satellite state to the vigorous power that joined the USA in kicking Sadaam’s rear end in the first Gulf War. 

As a low level Congressional staffer, I distinctly remember having serious discussions with Legislative Assistants over the proposed “card check” bill that would allow union bosses to see exactly who voted in what way during a union election, thus ensuring their ability to selectively intimidate workers. (Anyone remember Jimmy Hoffa?).

Apparently, the leadership of the Republican Party just hasn’t done a lot of analysis of this, or other issues. Maybe they are too busy getting on TV and sounding like they know something to take the time to actually know something.

A case in point; We have a tremendous internal fight within the Republican party right now over the future course of the GOP. One faction thinks the Republicans are too insular, old fashioned and stodgy and should try to be more like Democrats. The other faction thinks the Bush administration betrayed key Conservative principles and thus led the party astray from it’s path to success. This argument trickles down to policy of course, and now we have Republicans going on MSNBC to say that other Republicans are “insane” for trying to achieve zero growth on Federal spending and pushing for tax cuts in the teeth of a “depression”.

The thing is; the entire argument over how the government can get more dollars into the hands of consumers in order to stimulate the economy takes place on political ground hammered out between President Reagan and Congressional Democrats in the 1980s. A tax cut puts dollars into people’s hands so they will spend and boost the economy, it increases revenue. On the other hand, the government can more precisely direct how dollars are spent if it spends them itself… etc and etc ad infinitum. This argument is about as old as most of the people serving in Congress (which is really saying something). 

You want a near trillion dollar stimulus to directly boost the US economy and you don’t want to increase the Federal budget to do it? I have one word for you, deregulation.

It goes like this; the US economy is the most regulated economy in the history of mankind. We have so many regulations that the US Congress itself cannot even keep track of them (which is a constitutional problem since they have the force of law and are therefore supposed to be only created by Congress). Nobody actually knows how much these regulations cost the American taxpayers and consumers every year because all the different agencies that are independently empowered to create endless regulations only pay attention to their particular area of regulatory activity. The only office that could probably compute how much money our expanding regulatory structure costs us is the OMB (Office of Management and Budget) which only finds out what the President wants to know, and I seriously doubt that Obama is interested in deregulation. Of course, Congress could commission a study, but as I said about Republican leadership… well…

It breaks down like this, we have a credit crisis. Financial institutions are collapsing. Auto makers are scared that dealers wont be able to get short term loans to buy cars from them in order to put on their showroom floors. If they cant do this, the entire US auto industry dries up overnight. So what does the Federal government do? Throws billions of taxpayer dollars at the auto industry of course. 

Did anybody stop to ask why it is that dealers have to borrow money to get cars from the factories anyway? It is because of a federal regulation that does not allow Ford, for example, to sell Fords. They can manufacture them, but they must rely on another business entity to actually run a showroom. Now, if this regulation were not in place, the entire industry could contract in bad times as a unit, rather than all of the contraction happening only in the manufacturing sector, while the showrooms just buy more foreign cars. The Federal government created the problem and then taxed you to put a band aid on it.

Here’s another example, California decides that it will not allow “heavy fuel oils” to be used by ships entering California ports. They cause too much air pollution you see. Of course, California is the only place that restricts the use of this fuel, so it doesn’t make any sense for shipping companies to trade up to more expensive fuels just to enter LA or Oakland. The shipping companies redirect their ships to Portland or elsewhere, and within weeks, news reports of thousands of job losses in California ports are circulating. Nobody seems to put two and two together. 

How much does it cost us when OSHA suddenly outlaws all the older saws that construction companies have been using for years and demands they buy new ones with better “safeties” (as if construction will ever be really safe). Just one contractor could spend hundreds of thousands of dollars on new tooling. That is money he will not be spending on hiring people. That means job losses, or new jobs not created. Multiply this effect across the entire United States and the numbers are staggering. We could be looking at trillions of dollars of cost to the US economy because we cant be trusted to take care of ourselves anymore. 

What about the cost of constantly increasing regulatory standards for automobiles? A new model has to be put out every couple years not because the market demands it but because the government does. What about the average of 40,000 pages of paperwork that go with every new drug application to the FDA? How much does that cost? Nobody knows.

If we are truly facing a depression, I think people would be willing to do without their OSHA mandated back braces and new, new side impact airbags for a couple years in return for a trillion dollar economic stimulus that costs the taxpayer zero.

Serious deregulation, as opposed to the haphazard diet version that has been bandied about amongst Congressional Republicans for years, would make Obama’s stimulus bill look like chump change. It would cost zero new taxes, zero new money printed, and zero new debt. 

Back in Reagan’s day, the whole idea of a big tax-cut that would actually increase government revenue thanks to a growing economy was radical. This is today’s “Reagan tax cut” idea. 

If the Congressional Republican leadership started talking about this kind of an idea, a real paradigm shift, they would see a major increase in support. This is the kind of idea that gets a party into control of Congress. This is the kind of thing that changes the ground of the debate for decades to come. 

Do I think the GOP will run with it? Well, I don’t know. It depends on the Republican leadership…


~ by Jubal Biggs on March 17, 2009.

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