Reagan knew how to fix the economy, and so do I

By Newt Gingrich
Special to the Observer

The recession “officially” came to an end two and a half years ago. President Obama and his Washington establishment tell us the economy has been moving in the right direction since June 2009.

But when I talk to families in South Carolina and across the country, few share the elite sentiment that everything is going just fine.

Dynamic recovery is possible. It has happened in many of our lifetimes. Remember that Ronald Reagan also inherited a blistering recession when he took office in 1981. But unlike the current administration, President Reagan had a clear plan, and he followed through: tax reform, a sound dollar, expanded American energy production, smarter regulations and faith in job creators.

If we restore these jobs and growth policies, within a year the American economy will take off on another historic boom.

When that recession officially ended in November 1982, almost 12 percent of South Carolinians were unemployed. But over the next two and a half years, the Reagan recovery roared in the Palmetto State – beginning the longest prolonged period of growth in American history.

While Reagan put his faith in American job-creators, President Obama has demonized them and looked to government for solutions: a wasteful trillion-dollar stimulus, a trillion-plus-dollar Washington takeover of the health-care system, a weakening dollar and an activist NLRB that tried to kill jobs in South Carolina.

America is suffering this nightmare because President Obama has pursued exactly the opposite of every jobs and growth policy undertaken by President Reagan.

First, we must lower the corporate income tax rate, among the highest in the industrialized world, to 12.5 percent. We must eliminate the immoral and wasteful death tax, and zero out the capital gains tax, which now acts as a double tax on families and businesses.

We must allow immediate expensing (writing off the costs in one year) for investment in capital equipment so American workers can continue to be the most productive in the world using the latest and most advanced technology.

I propose an optional 15 percent flat tax, allowing those American taxpayers who prefer it to file on a postcard, saving close to half a trillion dollars in tax compliance costs each year.

These tax reforms are designed to maximize job creation, wages and economic growth. The massive growth in jobs and productive work, coupled with spending cuts, will be the key to balancing the budget.

Second, we must reestablish a stable dollar so that the purchasing power of a dollar is the same 30-40 years from today. Unstable money is a great threat to our return to prosperity. Part of our approach on the dollar will be to reestablish something Ronald Reagan did in 1981 and that is to have a Commission on Gold to look at the whole concept of how do we get back to hard money, which is a necessary component of stable growth.

Third, we must end the costly regulatory assault on American businesses and consumers, starting with the repeal of Obamacare with its job killing individual and employer mandates. We must also scale down the powers of many job-killing Washington-centric bureaucracies, such as the NLRB, and return decision-making powers to states and communities.

Fourth, we must tackle entitlement reform. We can strengthen Medicare and Social Security by offering the choice to expand personal savings, investment and insurance accounts until they ultimately finance all the benefits now financed by the payroll tax, eventually displacing that tax entirely. And we can save trillions by applying the highly successful 1996 welfare reforms to the 200 other federal means-tested programs, block granting them back to the states.

Finally, we must have an American Energy Plan that will free the energy industry to maximize production of all forms of American energy, including off the coast of South Carolina, assuring the reliable supply of low-cost gasoline, diesel, natural gas, coal and other energy sources essential to fueling a booming economy.

Getting Americans back to work and restoring our economic strength is only the start of the great and uplifting task of renewing America. Together we can make her once again the great and hopeful nation she has always been, a beacon to the world. And yes – from Pilgrim Father John Winthrop to President Ronald Reagan – that shining city on the hill.

If you give me the chance, together we will bring America back stronger and more hopeful than ever. We will rebuild the America we love.