Battle4Liberty

The ongoing debate on the so-called “jobless recovery” is intensifying. The Obama line is that his aggressive (massive) spending “saved the economy from the brink” and current stagnation is part of a long term problem created by Bush ineptness. Finishing the job requires more government intervention and debt, as the free market is simply unable to do the job without government supervision. The notion of a second stimulus has been bantered around by some on the left as well. 

Republicans have largely rejected the Obama narrative, but don’t seem to be clear about what should be done. Some are suggesting business tax credits for new hires or temporary income tax cuts. These are not bad ideas per se, but they don’t directly address the core problem, harmful government intervention in the economy. It’s crucial that Republicans reject the Keynesian thinking and social engineering that got us into this mess in the first place, and these ideas don’t quite hit the mark.

The notion of a temporary tax cut is appealing at first glance, and is certainly better than more government spending. The problem with this proposal is that tax cuts only reduce the size of government when they are permanent and are accompanied by spending reductions. The Obama balance of high taxes and higher spending is unsustainable and economically irresponsible. A temporary tax cut suggests that Obama’s approach may not be optimal at the moment, but could be workable when the economy recovers. Nothing could be further from the truth.

Likewise, a tax credit for businesses that hire workers could have some short term positive benefits. But providing a temporary tax break for new hires encourages companies to hire workers whose value to the business would be less that the wages they pay. Such a program amounts to a government subsidy, and layoffs will follow when the tax credit expires. If businesses cannot afford to hire workers, then why not reduce their regulatory burden and taxes on a permanent basis?

Obama’s massive government intervention has failed, and Republicans must decide how to respond. One option is to propose a blend of conservative and neo-Keynesian programs that don’t address the core problem of fiscal irresponsibility and Constitutional neglect. The pundits tell us that such a proposal would attract moderates to the fold. Bush drifted in this direction during his presidency and lost the conservative base. McCain tried a similar approach in 2008 and never got it back.

Another option is to tell the complete truth. Many Americans sense something terribly wrong with Obamanomics and are open to an alternative. The left’s healthcare package wreaks of big government and restrictions on individual liberty, and those who thought the Dems were about responsible change are seeing the party for what it really is. Republicans have a chance to propose a real solution, not just a shift to the middle. 

So what should a real solution look like? Here are a few pieces of the puzzle:

1. An immediate halt to all stimulus spending.

2. Permanent tax cuts, including a simplified flat or fair tax system, a substantial cut in the capital gains tax, and the elimination of wealth transfer through the tax code (i.e., earned income tax credits). 

3. A substantial reduction in the size and scope of government that brings about spending cuts and reduced regulatory burdens on business.

4. A reorganization (if not elimination) of the Fed to end its meddling in the economy.

5. An end of global negotiations on climate change. The evidence for anthropogenic global warming is spotty at best. Cap-and-trade and other socialist schemes should be summarily rejected.

If you think I sound a little extreme, you’re right. Capitalism is the solution to our economic problems and need not be “kept in check” by bureaucrats. We owe no apologies for a system that created the wealthiest nation on earth. It’s time we take a real stand. The Dems have given us a perfect opportunity to do so. We might not get another chance.