Republicans may have the right message when it comes to the urgent need to slash federal outlays, but it’s not enough. With so much of the treasury being swallowed by ever-expanding entitlement programs like Social Security and Medicare, there is no way slimming the discretionary budget alone can get us to the point of solvency. That’s why the lack of attention to pro-growth policies in Washington’s current budgetary scuffle has been disappointing.
Freshman Rep. Tim Scott, South Carolina Republican, wants to change that. Earlier this month, he introduced legislation that would lower the corporate tax rate from 35 to 23 percent. By year’s end, America will be the country with the highest corporate tax burden in the industrialized world, according to a new analysis by the Tax Foundation. The previous title holder, Japan, has scheduled a 4.5 percent reduction in its rates. While other countries have steadily lowered their tax burdens over the past 20 years, the U.S. figure has remained unchanged - and uncompetitive. There’s no sensible reason to build a business here if the work can be moved to a friendlier climate overseas.
Mr. Scott, a former small-business owner, argues that increased government spending necessarily reduces economic growth. “As we continue to try all these new gimmicks in government spending, it always ends up in the same place in the long term,” Mr. Scott told The Washington Times. “If you take $1 out of the pocket of a business owner, he has to now make $2 to make up for that $1 he’s just given to the government.”
No doubt, the left will respond to a pro-growth proposal with the usual Marxist slogan: “It’s a tax cut for the rich.” Yet there is no alternative; we’ve tried the big-spending, big-deficit policies. They began in the waning days of the George W. Bush administration and kicked into overdrive under President Obama’s stimulus binge. The resulting $14.2 trillion in debt is fast approaching our entire annual productive output of $14.7 trillion. We are at the point where the U.S. economy cannot recover unless we reverse course.
Japan was faced with the same dilemma in the 1990s, but it chose to stick with a government-directed stimulus model. Public spending there now accounts for 42 percent of gross domestic product, leaving behind a debt of more than $11 trillion - double the nation’s entire annual economic output. “For the past 20 years, the Japanese economy has been at a standstill,” Japan’s Prime Minister Naoto Kan said shortly after taking office last year. “Growth has stopped. Young people can’t find jobs. This is not a natural phenomenon. It resulted from policy mistakes.”
Our country cannot allow Mr. Obama and his big-government congressional allies to import the Japanese economic mistake. So far, 60 conservative lawmakers have signed on to Mr. Scott’s idea. Any potential deal on the budget or raising the debt ceiling ought to include a discussion of tax relief that restores America’s competitiveness in the world marketplace.