- The Washington Times - Wednesday, April 15, 2009

(Part of our Reinventing Conservatism series)

White House Chief of Staff Rahm Emmanuel said, “Never let a serious crisis go to waste. It's an opportunity to do things you couldn't do before.”

Congressional Democrats have taken that to heart, dressing up trillions in pork-laden, run-of-the-mill Washington spending as economic recovery.

Their new budget will spend too much, tax too much, borrow too much and gets worse from there. As they attempt to ration health care, increase federal control over education and impose a national energy tax, they create more debt over the next 10 years than in the previous 220. They have not realized that we can't borrow and spend our way into prosperity.

Even New Deal architects knew this approach didn't work.

Henry Morgenthau, FDR's Treasury secretary said, “We have tried spending money. We are spending more than we have ever spent before and it does not work … after eight years of this administration we have just as much unemployment as when we started. … And an enormous debt to boot!”

As conservatives search for ways out of this crisis, we must remember that nothing is more important to economic recovery than promoting economic growth and spending discipline. We must begin by restoring investor confidence, creating legislative and regulatory certainty that encourages investors to do what they do best - invest.

Next, we cannot allow rightful taxpayer anger over subsidized bonuses to executives of failing financial institutions to morph into another manifestation of class warfare. As a nation, we need more voluntary capital from investors in our recovery and less involuntary capital from taxpayers.

Instead of concocting more TARP, Son of TARP and Grandson of TARP proposals, we must unleash a wave of investment and entrepreneurial capitalism throughout the land. First, we should zero out the capital gains tax for investments made in our economy for the next two years.

Next, we should permanently reduce the corporate capital gains rate from 35 percent to 15 percent. Economists say this could unlock $1 trillion worth of wealth for the economy that is desperately needed to preserve the jobs of today and grow the jobs of tomorrow. We should reduce the corporate income tax rate from 35 percent to 25 percent, aligning our tax policy with the average rate of our competitors in the European Union.

Small business is the job engine of our economy. We need to encourage more entrepreneurs and small-business owners to grow and invest in these companies. We can help by allowing a 20 percent exclusion for small-business income, extend the favorable bonus depreciation rules for small businesses, and extend the net operating loss carry-back rules for previously profitable companies. Making these common-sense changes will encourage investors stuck on the sidelines to put their capital back to work and help make American companies more competitive internationally.

We also need Washington to stop its reckless spending habits that allow the federal budget to grow exponentially faster than the family budget's ability to pay for it. That's why I have authored the Family Budget Protection Act, a comprehensive budget enforcement and spending discipline bill aimed at protecting the family budget from the explosive growth of the federal budget.

My bill would do this by first restricting the growth of the federal budget to no more than the growth of the economy, except in periods of bona fide national emergencies. Second, it would do away with so-called baseline budgeting, congressional rules that dishonestly and automatically inflate the growth of every federal program. Finally, it would take the annual budget from little more than a suggestion and give it the force of law.

Ultimately, you cannot control spending in Washington without meaningful entitlement reform. Thus, we should enact congressman Paul Ryan's “A Roadmap for America's Future,” which will make our entitlement programs sustainable and permanently solvent by ushering-in reforms such as giving Americans under 55 the option of investing more than one-third of their current Social Security taxes into personal retirement accounts and giving states maximum flexibility to tailor Medicaid programs to the specific needs of their populations. Without long-term entitlement spending discipline, there can be no sustainable economic recovery.

These are just a few of the things Washington can do to help get our economy working again. The challenges to our economy are great. The challenges to our freedoms and opportunity are even greater. As America grows weary of bailout mania and a sea of federal red ink for as far as the eye can see, conservatives will have opportunities to lead using creative ideas firmly rooted in first principles.

Rep. Jeb Hensarling of Texas is the ranking Republican on the House subcommittee on financial Institutions and consumer credit and the vice ranking member of the House Budget Committee.

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