Newt Gingrich promises to revive the Gipper's economic plan -- and then some
Happy returns: Gingrich's team advocates Reaganomics / AP
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Newt Gingrich's economic plan is not Reaganesque. It is not, as so many of his Republican presidential rivals' claim their plans to be, inspired by Reaganomics. It is Reaganomics, cryogenically frozen in 1981, thawed 30 years later, and pumped full of Newt-style steroids in order to save the American people from slow growth. The plan features massive tax cuts (which would largely benefit businesses and the wealthy), less government spending (through the privatization of entitlement programs), interest-rate hikes, and rampant deregulation.
The foundation is classic supply-side, trickle-down, Laffer-curve economics, which Gingrich's economic advisers predict will unleash a boom that will eventually generate enough tax revenue to balance the federal budget. How big will that boom be, you ask? What do the campaign's projections show? "If you go back to the Reagan years, from 1983, that's our projection of what the boom would look like--exactly," says Peter Ferrara, a former Reagan aide who helped draft the Gingrich plan.
Gingrich has shot to the top of the GOP field with relatively little examination of his economic agenda, compared to the scrutiny heaped on Mitt Romney and Rick Perry. Perhaps the best-known plank of the former speaker's jobs platform is looser labor laws to allow poor children to work as janitors in their own schools--an idea Gingrich loves to bat around, but which doesn't appear in his campaign's jobs literature.
What does appear is a package of tax cuts much deeper than Romney or Perry propose. Like Perry, Gingrich would let taxpayers choose between the current income-tax system or a flat rate. Perry's rate is 20 percent; Gingrich's is 15 percent. Romney would eliminate taxes on capital gains, dividends, and interest for taxpayers who earn less than $200,000 a year; Gingrich eliminates them entirely. Romney's plan cuts the corporate income-tax rate to 25 percent, while Perry's would be 20 percent. Gingrich would drop the corporate rate all the way to 12.5 percent--lower than even Ron Paul has proposed.
Gingrich, who blames excessive regulation for the 2008 financial crisis, also wants to advance Reaganomics by repealing the Dodd-Frank and Sarbanes-Oxley laws governing the financial sector and by replacing the Environmental Protection Agency and the National Labor Relations Board. He would reorient the Federal Reserve entirely toward taming inflation, axing the pursuit of full employment from its congressional mandate. He would cut spending by fundamentally restructuring safety-net programs, turning Medicaid into block grants to states and allowing Americans to opt into privatized accounts for Medicare and Social Security, eventually phasing out payroll taxes in the process.
"These are timeless economic principles," says Ferrara, a lawyer, author, and Gingrich economic adviser who directs entitlement and budget policy at the conservative Heartland Institute. The core of Reagan's 1980 platform, he points out, was an idea: "What we think is that it's not spending but production which is key to economic growth, and the key to production is production incentives."