Leave it to mini-Marxists George W. Bush, Henry Paulson, and Ben Bernanke to saddle American taxpayers with $8.35 trillion in bailout commitments, yet not spend one thin dime on incentives to revive the U.S. economy. In fact, the faintest echo of an incentive these days is not a Reaganite act of commission, but a Reagan-lite act of omission. Barack Obama — rated in January as the Senate’s most liberal member — seems to have side-stepped his statist ways long enough to scuttle his speedy end to Bush’s first-term tax cuts on upper incomes. Obama reportedly will let them expire naturally in 2011 rather than euthanize them in 2009. The Tax Foundation estimates this will leave $100 billion in private hands, where it will do some good.
It is outrageous that a nominally Republican administration, even in its dying days, would fight a financial crisis with every socialist gun blazing and not fire even one bullet in the name of supply-side tax reduction, regulatory relief, litigation reform, or anything else that would stimulate private-sector risk taking. How sad (and oddly encouraging) that only Obama — not the self-styled heirs of Ronald Reagan — has bothered to consider tax-hike repeal as one cure for the current unpleasantness.
To marvel at the bailout’s sheer scope, look for a while at the nearby chart from the November 30 New York Post. Chicago economist James Bianco compared major federal expenditures throughout U.S. history and adjusted them for inflation to today’s dollars. Bianco low-balls the bailout’s total price tag at $1.5 trillion (vs. the $8,349,120,000,000 in commitments and $3,147,120,000,000 in actual outlays that the Washington Post reported November 25). But even by that measure, the bailout already stands at thrice the cost of the New Deal alone! (For a detailed bailout breakdown, click here.)
Now that the Bush Administration has devolved into a sad, spent shell, Obama would be wise to embrace and promote these and similar incentives for Americans to work, save, invest, and produce:
Turbocharge innovation by letting anyone granted a new patent enjoy the revenues it generates for, say, five years tax-free. Watch inventors from Google to garages across America trip over themselves to create new products while Uncle Sam leaves them unmolested for half a decade.
Offer “Emerald Cards” to the planet’s 6.7 million non–North American millionaires. Without closing the Golden Door to those less fortunate, these high-end Green Cards would go instantly to any successful, law-abiding immigrant who could deposit $1 million in a U.S. bank, open a business, and hire at least five employees. One million such millionaires would pump $1 trillion into America’s economy and create 5 million jobs.
Immigrants who earn college and advanced degrees must depart soon after graduation, export their hard-earned talents, and begin competing against us. Nonsense! Those who display good behavior should be free to stay here and devote their energies to America’s advancement.
Use the free market, not the still-smoldering Fannie Mae and Freddie Mac, to recapitalize banks and foster home ownership. Let Americans save up to $10,000 tax-free each year for eventual home purchases. In the name of housing equity, renters also should be allowed to save for security deposits and initial years’ rent. While politicians scorn us, the estimated 32 percent of Americans who rent are people too — as the IRS warmly reminds us every April 15.
Make depreciation tables optional. Businesses should be free to write off capital purchases as quickly as they — not the feds — deem economical.
America frightens foreign capital by taxing it at the industrial world’s second highest corporate tax rate. At 40 percent (35 federal, plus 5 percent average state and local tax), only Japan’s 40.7 percent combined rate is higher. To become competitive and attract investment, this tax should be no higher than the European Union’s 23.2 percent average.
“How about a five-year emergency suspension of all capital-gains taxes?” suggests Club for Growth president Pat Toomey. The former GOP congressman from Pennsylvania added: “I know it’s too much to hope for, but consider: NO one has any capital gains! What could the fed’s cap-gains haul possibly be this year — maybe $1.50? There is nothing to lose and much to gain if it would stimulate investment and maybe even help the market establish a bottom.”
Is Obama’s potential support for these ideas just free-market fantasy? Perhaps. But extraordinary times demand extraordinary measures. Besides, Obama should remember that, before Ronald Reagan and the pre-socialist George W. Bush reduced taxes, John F. Kennedy chopped the top marginal income tax rate from 91 to 70 percent. JFK — to whom some like to compare Barack Obama — did this with a challenge the president-elect should resurrect: “Let’s get America moving again.”
– Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution. © 2008 Scripps Howard News Service