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Newt Gingrich 2012 Presidential Campaign Plan for the Economy


Newt Gingrich 2012 Presidential Campaign Plan for the Economy
Republican Newt Gingrich (Credit: Newt Gingrich 2012)

Overview of Newt Gingrich's 2012 Economic Proposals:

Newt Gingrich's 2012 economic campaign platform is focused on creating jobs through economic growth. His method to get there, like most Republican candidates, is to cut taxes and reduce regulations. According to supply-side economics, this is enough to unfetter businesses. The resultant growth increases tax revenue, thereby reducing the budget deficit. Gingrich also wants to cut non-defense discretionary spending, further reducing the deficit. In short, Gingrich wants to undo most of President Obama's economic policies.

Cut Taxes:

Gingrich advocates making the Bush tax cuts permanent. He says that uncertainty about whether the cuts will be extended beyond 2013 is interfering with business planning, and slowing economic growth. Gingrich also argues that job creation improved in 2011, after the cuts were extended. However, job growth was also a result of the long-term impact of the Economic Stimulus Bill, which reversed the recession in 2009. Growth was also attributed to the Federal Reserve's expansionary monetary policy and quantitative easing.
Gingrich advocates a 15% flat tax, keeping deductions on charitable giving and home ownership, and allowing a $12,000 personal deduction. He also proposes four tax changes to help small businesses expand:
  1. Eliminate capital gains taxes.
  2. Lower the corporate income tax to 12.5%
  3. Allow for 100% expensing of new equipment.
  4. End the death tax permanently (because many small businesses are passed down to future generations).

Reduce Government Size and Regulations:

Gingrich would repeal two financial regulations, the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform Act, which he says cripples small banks. He would repeal the Community Reinvestment Act and break up Fannie Mae and Freddie Mac into small private banks -- he blames both for causing the subprime mortgage crisis.

Gingrich would scale down both the Environmental Protection Agency and the Food and Drug Administration to reduce their impact on the industries they are regulating. He would reform Social Security and Medicare. Like all other Republican candidates, Gingrich would eliminate Obamacare.

Reform Entitlement Programs:

Gingrich advocates replacing the three entitlement programs with private sector solutions. This reduces the financial burden on government, but also eliminates an important economic safety net and reduces benefits. In summary, he would :
  1. Replace Social Security with a private savings program.
  2. Replace all assistance to low-income families with workfare programs under state management.
  3. Provide an option for federally subsidized private insurance in addition to Medicare.

Contract With America:

Gingrich advocates the same policies he used while Speaker of the House in 1994. Under the Contract, Republicans promised to pass 10 acts in the first 100 days that would:
  1. Balance the budget.
  2. Fight crime with funding for police officers and prisons.
  3. Replace welfare with workfare.
  4. Tax credits for adoption, children and the elderly.
  5. Repeal the marriage tax penalty.
  6. Increase defense spending.
  7. Increase Social Security tax incentives and benefits.
  8. Capital gains tax cut and small business incentives.
  9. Legal reforms.
  10. Term limits.
As a result of the Contract, Congress did balance the budget, repaying more than $400 billion in the U.S. debt. Taxes were cut, 60% of welfare recipients either went to work or went back to school, and defense spending was increased. (Source: House of Representatives, Contract With America; Newt Gingrich 2012)

Economic Impact of Lower Taxes:

When it comes to creating jobs, tax cuts don't give the most bank for the buck. Research shows that tax cuts, like the Bush tax cuts, create 4.6 jobs for every $1 million spent. Extension of unemployment benefits are more cost effective, because every $1 million spent creates 19 jobs. Why? The unemployed are more likely to spend the benefits, while recipients of general tax cuts might save them. Increased spending drives demand, and economic growth.

Corporate tax cuts don't trickle-down to more jobs, either. During the last two years, companies have reported great earnings, but have used the funds to pay out dividends instead of adding employees.

Other Impacts:

Privatizing Social Security and other entitlement programs will create further deficits. Payments into Social Security by young people is funding those benefits for current retirees. If they pay into a private investment program, then Social Security payments must come out of the general fund.

Repealing Dodd-Frank and other bank regulations would once again allow banks to invest in derivatives, one of the main causes of the 2008 financial crisis.

Gingrich's Early Years:

Gingrich received a B.A. from Emory University and a Master’s and Doctorate in Modern European History from Tulane University. He taught History and Environmental Studies at West Georgia College until elected as Georgia's Congressman in 1978. He served for 20 years, and was Speaker of the House from 1995-1999. In 2003, Gingrich founded the Center for Health Transformation. He served as the Co-Chairman of the National Commission for Quality Long-term Care and the Alzheimer’s Disease Study Group. He is the author of 23 books, including 13 New York Times bestsellers.(Source: Newt Gingrich 2012, Meet Newt, About.com Guide to Conservatives, Newt Gingrich Biography)

What Gingrich is Missing:

Gingrich has no proposals to help the housing market by reducing foreclosures. The pipeline of homes that are somewhere in the foreclosure process is hanging over the housing market, keeping prices depressed and prohibiting investors from buying homes. Until this problem is solved, a large engine of the U.S. economy is crippled.

The Gingrich tax cuts are based on supply-side economics, which worked during the Reagan Administration. That's because the maximum income tax rate was 70%, not the low 30% top rate we have today. Government spending also increased under Reaganomics at around 2.5% a year, mostly on defense. This doubled the debt, but also helped pull the country out of the 1981 recession. Reagan did reduce banking regulations, which led to the Savings and Loan Crisis of 1989.

Supply-side economic theory is based on the Laffer Curve, which states that tax cuts can stimulate growth. However, the Curve also shows that these cuts don't work if the maximum tax rate is below 50%, and in fact could be harmful to an economy trying to grow its way out of recession.(Article updated January 20, 2012)

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