PRESS
RELEASE
from
Newt 2012
February 23, 2012
Official Score: Gingrich Policies Would
Create 6.6 Million Jobs in
First Two Years; Balance Budget in First Term
Atlanta, GA – Newt 2012 Senior
Economic Policy Advisor Peter
Ferrara released the following topline summary of the official score of
Newt’s Jobs and Economy Recovery Plan, which predicts Gingrich
policies would balance the budget within the first term of a Gingrich
presidency and lead to 6.6 million new jobs created in two years:
Newt Gingrich has proposed a very aggressive, comprehensive, supply
side economics, jobs and economic recovery plan. It features
dramatically lower personal and corporate tax rates, the elimination of
the capital gains tax and death tax, deregulation and sound monetary
policy. The plan would especially roll back regulatory barriers
to
energy production, unleashing the private sector to maximize all forms
of American energy production. Full details of the plan can be
found
in Appendix A.
Art Laffer, supply side economics guru and architect of Ronald Reagan’s
economic recovery package, has endorsed Gingrich’s economic recovery
plan as the most promising pro-growth package, saying, “Newt has the
best plan for jobs and economic growth of any candidate in the
field.”
He predicts that the plan “would create a boom of new investment and
economic growth leading to the creation of tens of millions of new jobs
over the next decade.”
To demonstrate the impact of Newt Gingrich Jobs and Economic Growth
Plan, as well as his other polices for controlling spending and
reforming government, Newt 2012 hired Fiscal Associates and its lead
economist Gary Robbins to score the impact of Gingrich’s polices.
They
were chosen because they have a fully developed economic model with
demonstrated ability to estimate the effects of rate cuts in promoting
jobs and economic growth.
Their study yielded the following key findings:
- President
Gingrich’s pro-growth policies would create 6.6 million new jobs in the
first two years;
- President
Gingrich’s pro-growth policies combined with sensible
spending reductions and increased federal royalties from American
energy development would balance the budget in his first term;
- President
Gingrich’s structural reforms to entitlements would keep the budget
balanced.
President Gingrich Pro Growth Policies
Would Create 6.6 Million New
Jobs In Two Years
The Fiscal Associates score projects that Gingrich’s supply side
program would restore the economy to the long term economic growth path
of 1947 to 2007, when the economy averaged 3.2% real growth per year,
up from the current trend predicted by CBO of 2.4%. That catch up
would involve average real growth over the first 10 years under the
Gingrich program of 4.4% a year.
That booming economic growth would produce 6.6 million jobs in the
first two years alone, reducing the unemployment rate ultimately to
4.6%. The overall results from the Gingrich path would be a 20%
higher
standard of living for the American people compared to the Obama path,
indefinitely into the future.
This findings are consistent with the Reagan expansion resulting from
similar policies. The score does not include further economic
deterioration under the Obama policies likely to begin next year,
stemming from his dramatic tax rate increases already enacted into
current law for 2013, not to mention the further tax increases Obama
called for in the State of the Union, and in his recent budget.
Those
policies will cause another steep recession next year.
President Gingrich Would Balance the
Budget in his First Term
It was Newt Gingrich’s leadership as Speaker of the House of
Representatives which led to the last balanced budgets, and the Fiscal
Associates score of Newt’s policies show he would achieve this goal
again. In fact, with the above Jobs and Economic Recovery Plan,
President Gingrich would be able to balance the budget within his first
term.
The first step to balancing the budget is to restore booming economic
growth, which produces both surging revenues and reduced spending, all
by itself. In fact, each percentage point of increased GDP growth
by
itself reduces the deficit by close to $3 trillion over 10 years.
The Gingrich tax reform plan was not designed to be revenue neutral,
but to maximize job creation, economic growth and prosperity. The
Gingrich plan is not to bring revenues up to the level of federal
spending, but to reduce federal spending to the level of revenues
produced by a maximum jobs and growth economy.
The Fiscal Associates score projects a net revenue loss on a dynamic
basis from the above tax cuts of $140 billion in the first year.
But
the pathbreaking paper published by Harvard’s Martin Feldstein in 1996
in the prestigious American Economic Review projects the present value
of the net gain in GDP of shifting to personal savings and investment
accounts for Social Security of $20 trillion. Based on that
analysis,
we estimate that the additional revenues produced by the pro-growth
effects from those accounts would be at least $26 billion in the first
year.
In addition, the free market energy policy referenced above, unleashing
American companies and workers to maximize production of American
energy from all sources, would produce at least another $18 trillion in
future increased royalties and other pro-growth effects. While
that
too would grow sharply over time, we estimate at least $15 billion in
the first year from those effects alone, reducing the net revenue loss
below $100 billion.
That revenue loss would be overwhelmed by a budget policy of returning
every federal line item to 2007 levels, except Social Security,
Medicare, Medicaid, defense, debt interest, and federal employee
retirement benefits. That was just a few years ago, and America
survived perfectly fine with those levels of spending. The first
year
savings from that policy would be almost $500 billion, growing larger
in future years due to the lower trend line.
That would just be a down payment on the desirable budget cuts, as
federal spending grew by one-seventh as a percent of GDP during the
Bush years, and by another one-fourth already in the Obama years, less
than half the time for the Bush increase. Further cuts would come
from
eliminating every corporate welfare program and bailout, and outdated
or counterproductive programs such as Fannie Mae and Freddie Mac.
Repealing Obamacare would save at least $725 billion in the first 10
years alone.
Additional spending reductions proposed by House Budget Committee
Chairman Paul Ryan in his 2012 and 2013 budgets, and by the
Simpson-Bowles Commission, would be adopted as necessary to balance the
budget. The Fiscal Associates score shows that these budget cuts
would
easily balance the budget in the first Gingrich term. Indeed,
that
score shows that the pro-growth effects of the tax reforms alone would
balance the federal budget within 10 years. The budget plan that
Speaker Gingrich negotiated in the 1990s in fact produced a balanced
budget in 3 years.
President Gingrich Would Keep the
Budget Balanced
That budget balance would be maintained over the long run by the
sweeping entitlement reforms specified in great detail at
Newt.org.
Those include beginning and expanding an option for personal savings,
investment and insurance accounts for Social Security and Medicare,
eventually expanded to finance all the benefits financed by the payroll
tax today. That would ultimately shift federal spending equal to
10%
of GDP to the private sector, where the private savings, investment and
insurance would pay better benefits than Social Security even promises
today, let alone what it could pay. The transition to the
accounts is
financed entirely by the reduced spending from the other entitlement
reforms, as was accomplished for the personal accounts proposed in the
Ryan Roadmap, as scored by CBO.
The transition financing plan also includes extending the enormously
successful 1996 AFDC welfare block grant reforms, adopted under Speaker
Gingrich’s leadership, to all of the nearly 200 federal means tested
welfare programs, block granting welfare back to the states.
Based on
the results of the 1996 reforms, we estimate that would likely reduce
federal spending by $4.14 trillion over the first 10 years alone, while
the poor would benefit further as they did under the 1996 reforms.
Further transition financing would result from adopting the Medicare
reforms proposed by Sen. Ron Wyden (D-Ore) and House Budget Committee
Chairman Paul Ryan (R-WI), along with ultimately a personal account
option for the Medicare payroll tax that would generate additional
resources in retirement to help pay for private insurance in place of
Medicare. Each senior would be free to choose among those private
alternatives or traditional Medicare if they preferred. That
choice
would benefit seniors by freeing them to escape the rationing President
Obama is imposing on traditional Medicare.
The entitlement reforms would also include repealing and replacing
Obamacare with Patient Power, as proposed by the godfather of Health
Savings Accounts, John Goodman of the National Center for Policy
Analysis. These reforms would reduce federal spending by 50% as a
percent of GDP over the long run. That would be the largest
reduction
in government spending in world history, and a complete solution to
America’s fiscal and entitlement crisis.
Committee for a Responsible Federal
Budget (US Budget Watch)
The policy of the so-called, self-appointed Committee for a Responsible
Federal Budget (CRFB) is that no budget is responsible that does not
include a tax increase. That is why they never had a positive
word to
say about the Ryan Roadmap, even though it was officially scored by CBO
as permanently balancing the budget over the long run, and achieving
full solvency for Social Security and Medicare, with no tax increase.
Because of that history and because they show no comprehension of how
to score the impact of economic growth in helping to balance the
budget, we provided no information on our tax and budget reforms to the
organization. Like Newt has said, “They want to score my Jobs and
Economic Recovery Plan without counting the jobs.”
The CRFB was started over 20 years ago as an organization dedicated to
reversing Reaganomics, by individuals who had lost the debate to Ronald
Reagan, and refused to accept his dramatic, historic proven success.
Appendix 1: The Gingrich Jobs and
Growth Plan
Tax rate deductions and eliminations:
- An
optional 15% flat tax;
- Federal
corporate tax rate of 12.5%;
- Zero
capital gains tax rate;
- No
death tax;
- Immediate
expensing for capital investment;
The plan would also slash regulatory costs and barriers,
including:
- Repeal
of Dodd-Frank;
- Repeal
of Sarbanes-Oxley;
- Repeal
of Obamacare;
- Repeal
CAFE Standards;
- Replace
the Environmental Protection Agency with an Environmental Solutions
Agency;
- Modernize
the Food and Drug Adminstration to enable new medicines to be
developed and brought to the sick far more quickly and far less
expensively.
More changes:
- Personal
savings, investment and insurance accounts eventually expanded
to finance all the benefits financed by the payroll tax today,
ultimately displacing that tax entirely.
- Reform
of the Federal Reserve to mandate that it follow a price rule to
maintain a stable dollar without inflation.
Appendix 2: Contrast with Obama’s
Budget
Note the sharp contrast between our budget reforms, and President
Obama’s just released 2013 budget plan. Obama’s budget includes:
- No
tax reform;
- No
lower tax rates to promote jobs and long overdue, booming economic
recovery;
- No
entitlement reform;
- No
new net spending cuts;
- No
repeal and replacement of Obamacare;
- No
net deficit reduction except as projected from tax increases that
will actually lose revenue rather than gain revenue (see history of
capital gains tax increases). In fact, if President Obama’s
already
enacted tax rate increases for next year, and the new taxes he
proposes, cause another recession next year, the result will be less
not more federal revenues, and still more deficits and debt.
But the Obama budget does include:
- The
fourth consecutive trillion dollar deficit, while the highest
deficit previously under any other President was less than half a
trillion;
- Further
job-killing tax increases, beyond those he has already enacted into law
for next year;
- Continued
increases in federal spending every year, totaling $3.795
trillion in 2012, an increase of over 27% during his first term alone,
up another $193 billion from the last year. President Obama’s own
budget proposes that spending to continue to soar by 2022 to $5.820
trillion, the highest spending in world history. Over the next 10
years, President Obama proposes federal spending totaling $47 trillion…
in his own budget!
- Projected
national debt held by the public to total $11.6 trillion for
2012, double the national debt of $5.8 trillion in 2008!
Consequently,
by Election Day 2012, Obama will have doubled the national debt, in
just one term of office. In that one term, he will have added as
much
to the national debt as all prior Presidents, from George Washington to
George Bush, combined!
- By
2022, Obama’s own budget projects that national debt held by the
public to total nearly $20 trillion! That would be the highest
national debt in world history. The gross federal debt, which
includes
the money the taxpayers owe in the Social Security trust fund and
similar federal debts, is projected in Obama’s own budget to total
nearly $26 trillion by 2022! That is projected to be just over
100% of
GDP that year.
- And
those projections of federal deficits and debt include all of
President Obama’s already enacted tax rate increases for next year, and
all of the further tax increases he proposes in the budget, with
federal income tax revenues projected to double by 2020, federal
corporate tax revenues to double by 2017, and federal payroll to double
by 2022. But as discussed above, the tax increases will not
produce
those dramatic revenue increases, meaning even higher deficits and
debt. Indeed, if those tax increases result in another recession
next
year, revenues will go down rather than up.
###
R.C. Hammond
Press Secretary