(pic curtsey of Gage Skidmore)
Today Gov. Rick Perry tries to stop the bleeding in his foundering presidential bib by releasing what he calls his “Cut, Balance and Grow” economic plan. After reading his pitch for it in the Wall St. Journal(Hi Uncle Rupert!) I can only say one thing; that man is an idiot.
I have yet to see the details (but if they are anything like the details in Ron Paul’s plan we know as much as we are going then, now) but what Perry is proposing makes no damned sense.
A major part of this plan is cutting. Cutting taxes, cutting spending, cutting regulation, you get the picture. But it is all done in the name of balancing the budget. The thing is it seems like there is a lot more cutting and not a lot of balancing.
Take this little bit of cognitive dissonance:
First, we will lower the corporate tax rate to 20%—dropping it from the second highest in the developed world to a rate on par with our global competitors. Second, we will encourage the swift repatriation of some of the $1.4 trillion estimated to be parked overseas by temporarily lowering the rate to 5.25%. And third, we will transition to a "territorial tax system"—as seen in Hong Kong and France, for example—that only taxes in-country income.
Okay so what Perry says here is that he’ll temporarily cut taxes on off-shore profits, as step two, but then in step three he wants to end taxes on foreign profits all together. Check me if I am wrong here, but why in the world would any company take the 5.25% tax hit when Perry has promised that eventually there will be no tax hit on overseas profits?
Perry also fails to understand how Social Security works. He promises to protect current beneficiaries but he also wants to have younger workers have private accounts. Maybe someone should explain to the oft confused G.O.P Governor that it is exactly those younger workers who pay for the current Social Security benefits? And then ask him where he thinks the money is going to come from for them now?
His big top line idea is again filled with conflicting bits of information. Take a look at this:
The plan starts with giving Americans a choice between a new, flat tax rate of 20% or their current income tax rate. The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.
This simple 20% flat tax will allow Americans to file their taxes on a postcard, saving
up to $483 billion in compliance costs. By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy. My plan also abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses.
Okay so he is all about choice here, claiming that you can have the current tax code or the new regressive and massively beneficial to the wealthy flat tax. Then he claims a nearly ½ trillion dollar annual savings from not having to enforce the old tax code.
But hang on! He said there was a choice. If even a plurality of the country stays on the old tax code there is still going to be a significant amount of cost.
Worse, note that Gov. Ricky is talking about enforcement of the tax code. There will still need to be enforcement; there will always need to be enforcement. You can’t just abolish all the aspects of the IRS and expect for taxes to be paid as they should.
He also wants to get rid of long term capital gains taxes, the estate tax, and taxes on dividends. Why? Just because he does not like them and thinks that giving millionaires and billionaires more money is a good idea for the economy. You know, because it has worked out so well so far.
Then we get to the cutting of regulation. Gov. Perry wants to repeal the ACA (which he, of course, calls Obamacare), all of the Frank-Dodd financial regulations bill and section 404 of Sarbanes-Oxley which deals with accuracy of financial reporting.
This is supposed to free up business to create more jobs, but we know that is not going to be the case. The only reason to create more jobs is that there is more demand and not amount of deregulation is going to create more demand if the people are out of work!
And, not to put too fine a point on it, the lack of these very regulations gave us such great hits and the Enron collapse, the financial melt down of 2008 and 50 million people without health insurance or health care in the United States.
Down toward the bottom of the hopelessly dazed and confused plan is the current Republican bright idea of capping spending at 18% and enacting a balanced budget agreement.
Both of these are horrendously bad economic ideas. Recuing spending like that would be a major blow to demand, in a time of weak demand. Worse it would require cutting all kinds of programs that working Americans are using to scrape by even further.
The BBA is just insane on its face. If such a thing had existed in 2008 we would not have been able to spend at all. That means we would have allowed the banking sector to collapse completely, precipitating a world wide economic depression.
Worse it means that we would always be hostage to the Grover Norquist’s tax pledge. After all when you have to have a balanced budget, there are only two things that you can do; you can spend less or raise taxes. Given that Republicans are in abject fear of Mr. Norquist that means that we would see a constant ratcheting down of the Federal Budget.
This would mean less and less spending on social programs, less and less on infrastructure, less and less aid to the States in terms of money for teachers and cops and firefighters. It is their dream come true but a flat nightmare for the nation as a whole.
The only good news is that Perry is very unlikely to be the Republican nominee. Even a party that is dedicated to a war against expertise can’t survive having an idiot as their candidate for president.
The floor is yours.