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The Tea Party and the Economy

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Ted Cruz

Senator Ted Cruz (R-TX) led the charge to defund Obamacare in 2013.

Mark Wilson / Getty Images
Rand Paul

Senator Rand Paul (R-KY) believes defaulting on the U.S. debt is a good way to cut government spending.

U.S. Senate
President Ronald Reagan

The Tea Party platform is based on President Ronald Reagan's economic policies.

Reagan Presidential Library

What Is the Tea Party?:

The tea party is a populist branch of conservative Republicans who are angry and frustrated over the growth of government spending, taxation and regulation. Tea party members maintain this infringes on Americans' personal liberties, as outlined in the Constitution, to pursue health, wealth and happiness.

The tea party reflects the values of Andrew Jackson -- self-reliance, individualism, loyalty and courage. They are suspicious of federal power, which is why they are such avid supporters of the Second Amendment. Therefore, they also oppose federal taxes and regulations that hurt small businesses and the entrepreneurial spirit that built America. This makes them anti-elitist, because they believe that ordinary people are wiser than the experts,  and that seemingly complicated problems have simple solutions.

Demographically, 65% are middle class (vs 50% nationally), 37% are college graduates or beyond (vs 25% nationally), and 47% are members of the Christian right. Many of them are small business people, who must stay profitable despite narrow margins. This is why they see taxes, regulations, and especially Obamacare, as direct threats to their livelihood. 

They consider themselves full members of the Republican Party, trying to move it back to a more true form of conservatism. They feel threatened by the new demographics in America, as symbolized by President Obama's election, because they are becoming a minority in terms of their religion, values and way of life. (Source: Washington Post, Galston: The Tea Party and the GOP Crackup, October 15, 2013)

The Tea Party's Economic Platform:

The Tea Party's economic platform follows its overall belief that less government is better, and that free markets are the best generators of jobs and economic growth. The tea party quotes former-President Ronald Reagan, “The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

Here are the tea party's four main economic policies:

  1. Eliminate the national debt which creates a burden for the next generation of Americans, and slows economic growth. As quoted by Alexander Hamilton, “As on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so on the other, it is equally evident that to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.”
  2. Eliminate deficit spending and balance the books as would be expected of any American business.
  3. Eliminate excessive taxes, which prevent families and small businesses from pursuing wealth.
  4. Protect free markets by deregulating business.

Eliminate Deficit Spending and the National Debt - The tea party is serious about reducing government spending. Their point is that out of control government spending infiltrates the government into Americans' lives, devalues the dollar, and invites inflation. Tea party members quote Alexander Hamilton on this, who said, “As on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so on the other, it is equally evident that to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.”

In 2013, the Party shut down the government, and nearly refused to raise the debt ceiling, because they wanted to defund Obamacare. They then included cuts to Medicare, Social Security and Medicaid as part of the conversation. See Government Shutdown for updates.

They also risked government shut-downs in 2011. In April, they refused to approve the FY 2011 Budget until $80 billion in cuts were agreed to. However, a CBO report said that spending would actually only decline $38 billion. As a result, ratings agency Standard & Poor's lowered the outlook on whether the U.S. could repay its debt.

In August 2011, the tea party delayed voting to raise the debt ceiling until $2.2 trillion was cut from spending over the next ten years in the Budget Control Act of 2011. As a result of a near default on the debt, the S&P actually lowered the U.S. debt rating from AAA to AA+.

Eliminate Excessive Taxation - In 2011 the Party also opposed Obama's American Jobs Act because he planned to partly fund it through tax increases to those making more than $200,000 and close tax loopholes for oil companies. Tea party members counter that the wealthy already pay their fair share, since the top 10% of earners pay 70% of taxes, while the bottom 46% pay nothing. (Source: Fox News)

Protect Free Markets - There is some dissension on what this means to various tea party members. Some, such as Americans for Prosperity, are in favor of free trade agreements. House Republicans are in favor of proposed FTAs with Colombia, Panama, and South Korea, which was part of their "No Cost Jobs Plan" earlier this year. Others believe these agreements send jobs overseas.

What the Tea Party's Policies Are Based On:

Reaganomics itself is based on supply-side economics, which states that lower taxes will stimulate enough demand to replace the tax revenues that were lost. This theory was based on the famous Laffer Curve, which demonstrates exactly at which point power taxes will result in higher tax revenues. However, Laffer himself warned that it all depends on how high taxes are to start with. Laffer's "Prohibitive Zone" starts when the tax rate is at 50%. If the rate is lower, then cutting taxes could slow economic growth.

Tea Party History:

The tea party took its name from the 1773 protests in Boston, where colonists dumped tea into the harbor. This was a protest to "taxation without representation," which the British government imposed on the colonies.

The modern-day tea party movement started in 2009 as a protest against Obama's economic stimulus package, which passed largely without Republican support. On April 15, 2009, many groups throughout the country held protests against Democrats' planned tax increases. The "Tea Party Express" commemorated 9/11 with protest tours August 28-September 12, 2009, and then again from October 28-November 12, 2009.

The party further solidified around opposition to the Affordable Care Act, which passed in March 2010, again without Republican support. (Source: About.com Guide to Conservatives, What Is the Tea Party?)

How the Party Came to Power:

The tea party swept into power during the mid-term elections in 2010. Tea party support gained 60 seats in the House of Representatives, leading to a Republican majority and a Republican House Majority Leader, John Boehner. Although Republicans won an additional 6 seats in the Senate, they didn't capture the majority. This election increased the Republican party's power enough to negotiate the extension of the Bush tax cuts for two more years. Despite President Obama's objections, they included the cuts to those earning $200,000 or more, which tea partiers maintain are primarily small businessowners.

Who's Involved in the Tea Party:

Some say the tea party was started by David H. Koch, head of the conservative "Americans for Prosperity", in coordination with another conservative group, FreedomWorks. Fox TV commentator and author Glenn Beck contributed the "9 principles and 12 values" of the tea party in his "9/12 Project." Fox News is also a supporter of tea party coverage.The Nationwide Tea Party Coalition, co-founded by former White House speech writer and Heritage Foundation policy analyst Michael Johns, is another important supporter. Article updated October 17, 2013

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