Before the third pandemic relief bill was even signed, big-spending congressional liberals were calling for more borrowing to help their bankrupt state brethren meet their runaway pension and state spending demands. Even the White House was talking about more money for “infrastructure projects.” All of this must stop.
Fortunately, Senate Leader Mitch McConnell (R-Ky.), who went along with the first three bills, is saying, “Slow down.” He will wait until early May, when members of Congress return to Washington. Conservatives should become a unified chorus in saying “No more!”
For one thing, Congress hasn’t been able to design the federal handouts correctly. The CARES Act provided $1,000 a week to the unemployed until July 31, incentivizing many restaurant employees and other low-paid workers to remain off the job until then. The Paycheck Protection Program — predictably — was hijacked by larger firms with skilled lobbyists who took most of the money, requiring Congress to refill the pot for the little guys for whom the bailout originally was intended.
There is only one right way to proceed: Return America to work under the successful 2017 Tax Reform and Jobs Act, which reduced unemployment to its lowest level (3.5 percent) in 50 years and increased take-home pay for average households.
The ability of the world’s most reliable borrower — the U.S. government — to acquire trillions of dollars at record-low interest rates has proven an irresistible temptation for the feds to spend literally “whatever it takes” during the pandemic. But these stimulus bills are no different than liberal Keynesian economics, as demonstrated by Obama Democrats in 2009 — which never stimulated anything except all-time record government spending, deficits and debt.
All the “stimulus” bills total $3 trillion to date, not counting the $4 trillion in new Federal Reserve “quantitative easing” (printing of new money). People are surprised that all that money has run out so fast. But when you are passing out free money to cover “immediate needs,” there is no limit to how many “immediate needs” will emerge.
That is transforming America from a capitalist system — paying people for satisfying consumer wants — to a socialist system that pays people for their “needs,” which only buys lots of “needs.” Former British Prime Minister Margaret Thatcher wisely observed that such a socialist system works fine until you run out of other people’s money. And that is exactly where the American economy, with all-time record national debt — now rocketing toward $30 trillion — is headed: national bankruptcy, the inevitable result of Marxist socialist economics.
The pre-pandemic American economy, growing rapidly under tax reform legislation, was paying people to produce real goods and services in accordance with decentralized market demand, serving consumer sovereignty. That cannot be replaced by central planning government control, with government financing everything and near-zero interest rate borrowed money. We must get back to tax reform and private sector economic growth as soon as possible.
The 25-year economic boom begun under Ronald Reagan was based on supply side economics, incentives for market-based savings and investment. There are several tax and fiscal policies we should adopt for recovery now.
First, expand the tax reform’s “expensing” (immediate deductions instead of depreciation over as much as 30 years) for investment in plants and equipment inside the U.S. That would encourage manufacturers to bring their supply chains back inside the U.S. from China and other vulnerable nations.
Second, a payroll tax holiday until Dec. 31, as advocated by Steve Forbes and Art Laffer, benefitting all workers from lowest to highest paid. Because the payroll tax is imposed on labor and employment, the “holiday” would encourage re-employment and reduce unemployment.
Third, index capital gains for inflation, which the Treasury could do on its own by regulation. The capital gains tax is another form of property tax, imposed on price increases in stocks, land, farms, ranches, businesses and commodities. Indexing would take inflation out of those prices, as taxing inflation makes no economic sense. Ending capital gains on inflation would be pro-growth, enabling reallocation of capital to its highest productive uses.
Fourth, we should end the 100-year- old “death tax,” passed to help win World War I, which is a deadly “wealth tax” that undercuts and harms private family-owned businesses unnecessarily, producing relatively small amounts of tax revenue, while costing families billions in annual life insurance premiums to insure around the tax.
Finally, we must end state stay-at-home orders, which are a counterproductive abuse of public health powers. We should be following the model of Sweden, not forcing workers to stay home producing nothing. We should focus on treating the sick and those most vulnerable to the coronavirus, who will show up for medical care when in need.
Restaurants, movie theaters, bars, sports and concert venues would have market incentives to serve customers with innovations to keep infections down — free masks, temperature-taking, physical separation. Let’s treat the healthy as adults who can make their own decisions while we restore America to maximum economic growth for the benefit of everyone.
Lew Uhler is founder and chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He collaborated with Ronald Reagan and economist Milton Friedman in California and across the country.
Peter Ferrara is the Dunn Liberty Fellow in Economics at King’s College in New York, and senior policy adviser to NTLF. He served in the White House Office of Policy Development under President Reagan, and as associate deputy U.S. attorney general under President George H.W. Bush.