Creditable Solutions To Reviving The U.S. Economy Without Tax Increases.

Posted By on February 21, 2010

IF YOU WANT CREDITABLE SOLUTIONS ……to our nation’s fiscal problems, go to a creditable source. Indiana Gov. Mitch Daniels gives his ideas for restoring our economy — which can be done, he says, without tax increases.

  1. Daniels is a man of deep thought and bold action. His state has one of the strongest balance sheets in the country, largely because of his stewardship. Most states have huge deficits; Indiana has none. Daniels eradicated a $1 billion shortfall, beginning in 2005 and built up an even bigger rainy-day fund — $1.3 billion. He pared government spending, sold a toll road to private investors at an enormous profit, and attracted new business to the state. Revenues are off steeply, so he will use $300 million of the surplus in fiscal 2010 so that taxes won’t rise in a recession.  Revenues, which are below 2007 levels, aren’t expected to recover soon.  Could Mitch Daniels cure America’s deficit problem, as he did Indiana’s?
  2. Unlike Indiana, the federal government can’t rely on cuts alone to achieve meaningful deficit reduction because the hole, at 10% of GDP, is too deep, says Daniels, a Republican who served as President George W. Bush’s head of Office of Management and Budget for two years. Lawmakers must help maximize economic growth, he says.
  3. The administration and Congress immediately should cancel the TARP program aiding troubled financial institutions and return both this money and the unexpended portion of last year’s $787 billion fiscal stimulus to the Treasury, “as a demonstration that we as a country are serious about deficit reduction,” he says. This will help to keep interest rates low.
  4. Then the administration should reform the Social Security system. This would be “the single, best, first step” towards achieving higher rates of long-term growth, Daniels says. “We need a new compact that preserves all of the old promises, but makes a newer, affordable compact with younger citizens,” he says.
  5. A health-care fix would come next and focus on individual responsibility, not the creation of a huge federal bureaucracy. “We won’t have cost containment until all of us are cost containers,” says Daniels. He would provide individuals with a tax credit for purchasing health insurance, putting them on the hook for lifestyle and coverage decisions.
  6. To trim more money from the budget, Daniels proposes a full examination of the nation’s international commitments, including defense. They should be replaced with a more forward-looking, affordable strategy.
  7. He applauds Obama’s decision to subsidize new nuclear plants. However, he thinks the administration should be bolder and promote all sources of domestic energy, including offshore oil and gas. “This is a matter of survivability. We are paying the worst persons in the world for their oil and gas,” he observes.
  8. The governor embraces “green power” and boasts that Indiana leads the U.S. in the growth of wind energy and ethanol production: “But do the arithmetic. These two sources of power are at the edges of what we need.”
  9. Daniels says that curbing entitlement spending by Congress is a pipe dream. One solution would be for Congress to restore the power of impoundment to the President, a power Daniels has in Indiana. Simply put, the chief executive isn’t required to authorize the Treasury to transfer every cent appropriated to various agencies by the legislature. Had Daniels not applied impoundment in his current budget, increased spending would have eaten the state’s reserves by the end of this fiscal year. Congress scrapped impoundment in the wake of the Watergate scandal, angry that Nixon had used it to block $12 billion in spending.
  10. Tax simplification would boost growth, he says. He is attracted to Wisconsin Republican Rep. Paul Ryan’s revival of an old GOP idea — giving taxpayers a choice between the current filing system and a new tax form simple enough to fit on a post card. “That would remove a lot of loopholes,” he says. He also views Ryan’s proposal to replace corporate taxes with an 8.5% consumption tax as pro-growth. And, as for the President’s deficit reduction commission, “It’s worth a try.”

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