An Economic Agenda for Republicans

usnews & world report-capitalcommerce blog ^ | October 18, 2006 | James Pethokoukis

[DredTennis]

An Economic Agenda for Republicans

No matter what happens on November 7, America is going to end up with a de facto divided government. Even should the GOP keep control of the House and Senate, it would likely be by the narrowest of margins. Most analysts think voters should expect nothing but gridlock for the next two years. So for the heck of it, I asked a couple of pretty smart guys–one on the left, one on the right–what their dream economic agendas would be for the Democrats and Republicans, within broad political reason.

Today is Tyler Cowen's turn to tell what he would love to see from the GOP. Cowen is an economics professor at George Mason University and director of the Mercatus Center, which studies how societies become and stay prosperous. He is also coauthor of the popular blog Marginal Revolution. Cowen calls his agenda "economic ideas voters need to hear."

1) Institute means-testing for Medicare. "The graying of America threatens to bankrupt our national finances, mostly through forthcoming Medicare expenditures. Medicare should be a welfare program for the needy, not a source of comprehensive coverage for wealthy old people."

2) Eliminate all farm subsidies, quotas, and price supports. Eliminate all tariffs. Eliminate all budget earmarks. Eliminate all corporate welfare. "No, these are not the 'big fish' in the budget, but we need to take a stand against the totally outrageous."

3) Take in more high-skilled immigrants, and make them legal. "This is a win-win situation, and we are turning our back on it."

4) Phase out all forms of capital income taxation, including the corporate income tax, and replace them with a carbon tax, including a gasoline tax.

[RightWhale]

This is radical nonsense. All that actually needs to be done is withdraw from the 1967 UN Outer Space Treaty and open a land office for recording deeds to celestial resources.

[mmyers]

Eliminate all farm subsidies? you will be damn hungry in a short time.

[Jaysun]

2) Eliminate all farm subsidies, quotas, and price supports. Eliminate all tariffs. Eliminate all budget earmarks. Eliminate all corporate welfare......

Define "corporate welfare". And the elimination of farm subsidies would need to be done in a smart way. Expensive food is bad for America.

4) Phase out all forms of capital income taxation, including the corporate income tax, and replace them with a carbon tax, including a gasoline tax. "Savings and investment boost economic growth, but when it comes to energy, global warming threatens as a major problem and our dependence on Middle Eastern oil damages our foreign policy."

Phasing out capital income taxation, good. Replacing this with carbon / gas tax, bad.

[misterrob]

No, we won't be. But rich people who own farms will not get tax breaks for land they don't utilize. Large manufacturers won't get government subsidies.

Get rid of the death tax and it will stop killing family farms.

[Hendrix]

"And the elimination of farm subsidies would need to be done in a smart way. Expensive food is bad for America"

Food prices would drop in the long run without subsidies and price controls. Those subsidies don't make any sense from a free market system. The same would be true for steel subsidies and prices controls, etc. All of it should be eliminated.

[Hendrix]

"Eliminate all farm subsidies? you will be damn hungry in a short time."

Nonsense.

[misterrob]

Corporate welfare could be defined as giving businesses tax breaks and government subsidies to influence market behavior. The fact is that if you need Uncle Sam to support a market then that market doesn't really exist.

Look at the pharma industry as a huge example of welfare. They are allowed to sponge off of the NIH for formulations and then spend huge amounts of money on marketing and sales expenses. They cry about having no incentive to do R&D if the government instills price controls but since the NIH is doing so much R&D for them why should they spend their own coin?

[Jaysun]

Food prices would drop in the long run without subsidies and price controls. Those subsidies don't make any sense from a free market system. The same would be true for steel subsidies and prices controls, etc. All of it should be eliminated.

I agree. But just like every other absurd idea pushed on us during the American Socialist Revolution, we need to be careful. We can't just end Social Security and Medicare tomorrow, it takes some planning.

[Jaysun]

Corporate welfare could be defined as giving businesses tax breaks and government subsidies to influence market behavior. The fact is that if you need Uncle Sam to support a market then that market doesn't really exist.

Look at the pharma industry as a huge example of welfare. They are allowed to sponge off of the NIH for formulations and then spend huge amounts of money on marketing and sales expenses. They cry about having no incentive to do R&D if the government instills price controls but since the NIH is doing so much R&D for them why should they spend their own coin?

I don't think we should tax Corporations at all. I agree with you in the example (pharm industry) that you provided. I think that history has proven a laizzes faire approach the best.

[Hendrix]

I agree it takes some planning to phase it out or we could cause a problem in the economy. The same thing is true of tax reform. If we got rid of the Internal Revenue Code and implemented a simple flat tax, it would save billions of wasted tax compliance resources. However, it would also suddenly throw a lot of people out of work, which could be bad in the short run.

[Jaysun]

I agree it takes some planning to phase it out or we could cause a problem in the economy. The same thing is true of tax reform. If we got rid of the Internal Revenue Code and implemented a simple flat tax, it would save billions of wasted tax compliance resources. However, it would also suddenly throw a lot of people out of work, which could be bad in the short run.

Right. Most of the problems that we face: the tax system, the welfare system, the education system, etc. took years to bungle. It's not impossible to set these things right, it's just going to take some thought and planning. You don't unf**k something like that overnight. The left made great gains (which translates: mankind was shafted) in the twentieth century. It can be corrected.

You understand this. But there are some that want to abolish theses idiotic programs overnight. Clearly, that's irresponsible and would do us more harm than good.