The term “uncertainty” has dominated the economy in 2010 as the recovery from the “Great Recession” continues to be slow. Unemployment remains at 9.6 percent, and economic growth is currently too slow to create the needed jobs to reverse unemployment. Federal spending continues to grow as the national debt (at least $13 trillion) and deficits increase at dangerous rates consuming much of the Gross Domestic Product. The budget deficit for 2010 will be at least $1.3 trillion. The Federal Reserve is attempting to stimulate the economy by initiating “quantitative easing,” which will inject more money into the economy. The threat of inflation and further economic decline is a reality, and anxiety is still felt over public polices being initiated or proposed by the current Congress and Administration. In order to resolve the uncertainty and solve our national economic and social problems, we must return to our tradition of constitutional limited government.
An additional source of anxiety is the looming tax increase in January 2011 that will occur unless the Bush Tax Cuts are renewed. It is still uncertain whether or not Congress will extend all of the tax cuts before the end of the year. The Patient Protection and Affordable Care Act (health-care reform) is also causing concern with its impact on both cost and jobs. The health-care reform law is not only questionable constitutionally, but it will add to the entitlement burden that is already in crisis with Social Security, Medicare, and Medicaid, which threaten to consume the entire budget unless reformed. The expansion of the regulatory state has also caused anxiety as the private sector braces for new regulations and the possibility of more regulations in the future. Both business and the financial sector face an expanded regulatory state, which will also include new health care regulations.
Reversing the current trend will require policymakers to return to policies rooted in traditional limited government. This includes initiating policies that will reduce government spending, reduce the tax and regulatory burden, and pay down the debt. Entitlement reform is also necessary to avoid a fiscal train wreck. Representative Paul Ryan’s (R-WI) “American Roadmap” proposal to address entitlements is a solid example of sound policy measures that will reform the issue of taxes, spending, health care, and entitlements.
In the 1946 midterm elections Republicans ran on the slogan of “Had Enough?” referring to the tax and spend policies associated with New Deal liberalism. The Republican majority in the “fighting 80th Congress” led by Senator Robert A. Taft pushed tax and spending reductions on a reluctant President Harry S. Truman. In the aftermath of the 2010 midterm elections policymakers must focus on policies that cut spending, reduce taxes and regulations, pay down the debt, and protect the dollar — in other words following a policy of limited constitutional government.
The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute. They are brought to you in the interest of a better informed citizenry.
John Hendrickson is a research analyst at the Public Interest Institute in Mount Pleasant.