Economy & Taxes

Read what Dave Anderson has to say.

Lamborn Platform

An “Economic Growth Plan”

The Lamborn plan is drawn from a May 24 campaign e-mail, asking “Where is Robert Blaha’s economic plan?” The Lamborn plan has three parts:

1 )  Tax Relief:  Across-the-board Tax Cuts

  • Permanently repeal the death tax
  • Make the Bush tax cuts permanent
  • Reduce or eliminate the corporate tax rate to 25% or lower (from 35% – the highest in the industrialized world)
  • Reduce or eliminate tax rates on capital gains and dividends

2)  Expanding domestic energy supply:  COMPLETED – PIONEERS Act (H.R. 3408)*

  • Expand availability of the Outer Continental Shelf and Alaska for oil and gas development
  • Increase safe nuclear energy in America
  • Promote safe, efficient production of natural gas, including the use of hydraulic fracturing

3)  Market Stability: Restore Stability to the Markets

  • Reject higher taxes on energy because such as the cap-and-trade bill
  • Reject higher taxes and costly regulations as part of the healthcare bill
  • No higher taxes for businesses that operate internationally
  • No job-killing changes to labor law, including card check and binding arbitration

* The PIONEERS Act passed the House of Representatives on February 16, 2012.  This legislation is stated to

  • Clear a path for the Keystone Pipeline
  • Open up ANWR for energy production
  • Open up the Outer Continental Shelf for energy production
  • Open up oil shale production in the west

 

The Lamborn Economic Plan is based on a set of assumptions:

A)  Government spending must be cut to restore growth

Current experience from the European financial crisis shows that the opposite is true. Attempts to create fiscal balance through forced “austerity” have had the opposite effect: larger budget and trade deficits, loss of personal income, economic depression and socio-political instability.

B)  “Lower taxes boost our economy”

This is true in a very general sense, but the size of the boost is dependent on the type of tax, the level of taxation from which rates are reduced, and on who the beneficiaries of the cuts are.

The tax cuts recommended by Mr. Lamborn will benefit primarily corporations as well as top individual earners. Neither of these two categories will spend the money – as an average citizen is likely to do. They will instead invest it in whatever location or asset providing the highest return. This in turn is dependent on the incentives offered by various governments.

Under the system favored by Mr. Lamborn the U.S. would need to match the incentives offered by other government competitors, like the government of China. Such a government – repressive and dictatorial – can force its citizens and corporations to match any incentive our own government offers. Under those conditions a tax cut would reduce U.S. government revenues without any compensation in terms of economic growth.

C)  Regulations must be cut

It is true that the lack of effective regulations concerning environmental protection, work safety and the right to form unions in competitor countries such as communist China reduces industrial costs and is a strong incentive for multinationals to source production outside the U.S. Matching “Chinese conditions” for the sake of competitiveness alone would however take the U.S. back to the working conditions of the 19th century. Is this desirable?  There are many ways to achieve competitive balance.  We don’t want to be in the “race to the bottom.”

Note: It is true that excessive/intrusive regulation should be limited, particularly when the aim is ideological rather than humanitarian or economic. This is better justified on grounds of general efficiency (government operations should be subject to efficiency metrics) or constitutionality (should non-elective agencies have the power to effectively legislate?).

D)  We need a “Taxpayers’ Bill of Rights”

We need representatives whose primary concern is to further their constituents’ and the nation’s interests. Most of the current economic predicament is due to the collusion between financial, corporate and political interests bound through lobbying and campaign financing.

Our rights – and the functions of government – are already spelled out in the Declaration of Independence and the Constitution.  We need members of Congress to act on behalf of the citizens’ interest.

An “Economic Growth Plan”

Plan content addresses a very limited number of the issues required to restart the US economy.

1. “Across the board” tax cuts

The cuts proposed heavily favor upper income taxpayers and corporations, the income of which has increased considerably over the last decades even while the economy has deteriorated. At present low tax rates, the lowest in American history, there is no reason to believe that further reductions will lead to greater investment and/or demand in the U.S.  There is no evidence that this theory has ever worked.  Experience with the Bush tax cuts should have had America swimming in jobs, rather than in deficits.

THE issue with taxation is that in global competition, other countries have shifted from income taxes to a system of consumption taxes as they have reduced tariffs in trading relationships.  American taxes are buried in product cost and therefore in prices, making American exports high priced in international markets.  Because consumption taxes are rebated to foreign producers when they export, imported products are low priced in American markets.  Tax rates do not matter so much as taxing in ways that make the US competitive.  Right now we are taxing jobs and productivity.  That MUST change.

2. Expanding domestic energy supply

The United States is largely self-sufficient in energy, except for transportation fuels.  Demand presently requires importing 9 million barrels of oil each day.  The largest oil field ever discovered in America was Prudhoe Bay, which generated 1.5 million barrels of oil per day.  The US would need the equivalent of six Prudhoe Bays to offset imports of transportation fuels – an unlikely scenario.  It would be useful to understand exactly what quantity of output Congressman Lamborn expects from increased drilling, in particular and as the essential means to generating transportation fuels, over time.  Although demand is rising rapidly in China, the US remains the largest consumer of transportation fuels, with the smallest reserves.

While nuclear energy has the lowest cost per unit of production, front and back-end costs are totally unresolved – call them infinite.  The process of extraction and milling, and the process of spent fuel disposal are truly problematic. There is, for example, a fifty-year-old Superfund site in Canon City, where uranium milling has contaminated groundwater, reduced property values and stunted community growth – and where community health outcomes have not been measured.  Safety is essential in all elements in the nuclear power production cycle; Congressional Representative involvement in District 5 issues is warranted; however, Congressman Lamborn and his office have not been forthcoming.

Hydraulic fracturing has been done for forty years.  So long as casing is performed carefully, contamination is infrequent.  Drilling quality assurance and the effect of fracturing chemicals are open questions, as is the effect of leaving these chemicals in the ground.  Liability associated with process failure and contamination needs to be assessed definitively, as exposure is likely to become clear only after those responsible for the problem are no longer physically or financially capable.  We do NOT want to privatize profit and socialize costs.

3. “Stabilizing the markets”

The Lamborn plan assumes that markets and competition are self-regulating.  This is a contradiction of historical experience and the competitive environment that the US maintained from the 1790s through 1945.  Indeed, the American Revolution was fought to free Americans from the oppression of English monopolies.  Although asserting that “Business investment is paralyzed by the threat of increased government regulations,” the list of policy points does not reflect an understanding that domestic, US producers are at a disadvantage because foreign governments – and in many cases their state-owned enterprises – are playing a totally different game.

US energy prices are the lowest in the world.  Other countries have already imposed the type of taxes that the Lamborn plan rejects.

US healthcare costs are twice as high as our global competitors, with overall results that rank between forty and fifty among all nations.

Income taxes are a very clear problem, when embedded in product cost.  The Lamborn plan does not propose alternatives.

Labor costs are not high on the list of global competitiveness problems. Germany and Japan generate higher levels of export activity, and consistent trade surpluses, with higher wages.  Foreign government subsidies and differing tax systems are at the top of the list of global competitiveness problems.  At the same time, our working people are our consumers, and the middle class is shrinking and incomes are dropping.  Without increasing – rather than reducing – what people earn in their paychecks, we will not recover and cannot be secure.

 

In summary, the Lamborn plan would amplify recent trends which, while increasing corporate profits and incomes at the top, also keep incomes stagnant and reduce employment opportunities for most of the U.S. population.

 


Dave Anderson for Congress Platform

Issue

America needs GOOD Jobs, millions of them.  We KNOW how to create the conditions that will generate these jobs – which will reduce Federal spending (deficits), increase personal income dramatically and restore confidence.  THE answer is simply to make more of what we consume, by FIRST leveling the competitive playing field in global trading relationships. If we do this right, the SECOND outcome is a set of country competitor behaviors that help everyone aspire to a secure future.  A critical THIRD step is to restructure our government and the FOURTH important step needs to be to assure that everyone is invested in Citizenship.  We’ve’ outsourced’ many of our personal obligations and are not reacting to the situation in a way that our forefathers did. All of this needs to change; call it a paradigm shift or a return to a set of principles that were proposed by Alexander Hamilton and adopted by the first Congress.

Think of football …

We expect John Elway and John Fox to put a strong team together, mindful of league rules, and to ‘match up’ with competitor capabilities to win EVERY week.  American businesses facing foreign competition, are playing in a league that most of us wouldn’t recognize or accept.  They start on the one yard line and get three downs; the other teams always start on ‘our’ 49 and always get to score.  Our team doesn’t wear protective gear; the others always have it on.  Our team plays by the domestic rules; the other team doesn’t.  And, oh by the way, the officials are looking the other way.

It should be no surprise that we’ve lost more than 50,000 manufacturing businesses in the last ten years, all told at least 10 million jobs – or that Alan Blinder of Princeton University wrote a Wall Street Journal article projecting loss due to competitive conditions at between 40 and 50 million jobs. This competitive situation is why we are still in the Great Recession, why middle class income is shrinking and our wealth is evaporating.  Article I. Section 8 of the Constitution assigns responsibility for managing these competitive conditions to Congress.  We’re going no-where fast because Congress has abdicated responsibility for negotiation of ‘trade agreements’ to an Executive Branch over the past twenty years, passing a set of so-called ‘free trade’ agreements that are anything but free or fair.

Alexander Hamilton got it right with his Report on Manufactures in 1791, a set of economic rules that sustained American growth and vitality through 1945.  In post World War II reconstruction efforts, economic policy was subordinated to foreign policy.  As other countries rebuilt, they adopted economic policies that America had abandoned, leaving our economy and our producers vulnerable even in our own markets.

Ronald Reagan was the last President to recognize threats and to act – to preserve competitive markets and a level playing field.  From 1980 to 1985, the Japanese government took very conscious steps to devalue the yen.  The U.S. trade balance with Japan went frighteningly negative and many of us were concerned that ‘they could own us.’  President Reagan, in an powerful speech in September of 1985, told the Japanese and the world that he would not permit foreign governments and their state-owned enterprises to take advantage of American producers – companies or their workers, who are our consumers.  President Reagan slapped a 15% tariff on Japanese motorcycles, and said that if that signal didn’t work, the tariff would go higher and the rate would too – whatever necessary to stop the cheating.  The tariff worked, and over the course of five years, negotiations restored competitive conditions and our trade balance with Japan went back to neutral.

Beginning with the first President Bush, and on through the Clinton, Bush II and Obama administrations, those incredibly unfavorable ‘game conditions’ have been the norm.  American producers have to be darn good to score.  Charts* on international trade activity look like our economists were trained by 17th century physicians – thinking that ‘bleeding’ our economic body would restore our health.  This is NO way to play  the game.

What do we need to do? Where do we start?

Alexander Hamilton got it right, and President Reagan provided the last effective game plan.  Other nations have simply adopted that plan and we need to match up.  Trash talk means little when the game is smash-mouth and we’re competing for our livelihoods.  Make no mistake, we are in that kind of game.  What we need to do is very clear; it should be easy to see, though hard to do.  And yet, our competition will not take us seriously until we are ready to demonstrate a will to act.

The Reagan plan was a ‘Three-tiered trade policy’ for

  • Free and fair trade with free and fair traders.
  • Countervailing measures against those that would cheat.
  • A helping hand to those in need.

Hamilton’s plays or tools included a tariff system that changed depending on competitor action and circumstance.  Notably, tariffs funded our much smaller Federal government through 1914.  A current day game plan would:

 

  • Scrap the so-called “free-trade” agreements which really aren’t free and prevent our domestic businesses from being able to compete globally.  Stop nations that undermine and manipulate our market by ‘dumping’ cheap goods here.  Our unemployment level is the “high cost of cheap goods.”
  • Stop taxing goods production and jobs. Instead we should be taxing consumption and financial transactions.  This change matches up directly with what other industrial nations, our global competitors, have done.  This eliminates disincentives for goods production in America, and will lead to more manufacturing jobs and consumer confidence, income and wealth creation here.
  • Build a game plan for turning the economy around – something real, achievable, and measurable.  We call the elements ’15% Solutions.’  They are all geared to providing a natural stimulus of revenue and personal income that is as large, every year, as what the government has borrowed in most recent recovery efforts.  We must do the following:
  • Make more of what we consume – Increase our goods production to 15% of the economy.  In the 1960s, goods production was 30%; it’s less than 10% now.  Global competitors are careful to keep goods production near 20%.  We do this with tariffs or countervailing duties, that go down as foreign governments stop cheating in our markets.
  • Reduce our energy consumption of imported oil from 25% to 15%.  We have very realistic opportunities to increase efficiency in almost everything that we do; these are great job and wealth creation opportunities.  We also have truly great energy technology opportunities to reduce reliance on imported oil, while eliminating CO2 and NOx emissions.  Job growth in Congressional District 5 could be great with the right steps in energy.
  • Reduce health care costs – from the 20% of our economy down to 15% – for starters.  We’ve GOT to get healthcare down under 10% of GDP, but NO ONE is talking about how to do that.  We spend 50% more on health care than any other developed nation, and yet, we have poorer results.  We’ve got to stop talking about who pays and do a straightforward analysis of what to do about the cost drivers.  The government in Taiwan did this 15 years ago, with American consultants, and now the cost of healthcare there is 7% of GDP; everyone is covered and no one goes bankrupt.

 

What can we do now, locally?

These are the plans to promote as Congressman.  But there’s also action we can take right now.  We need to exercise our independence from foreign goods and support those who are already doing business right here, right now.

We work hard, so let’s buy smart.  Buy from local businesses. Supply will always rely on demand, so create a demand for local businesses and American goods.

What will this accomplish?

  • If we work together and get a Congress that will do the same, we WILL see 5 million GOOD jobs as fast as that trade balance moves toward breakeven and 25 million NEW jobs created over the next 10 years accompanied by unprecedented creation of wealth.
  • We WILL see our budgets balanced and the national debt will be reduced.
  • Our industrial sectors will be rebuilt and new ones created.
  • American independence will be assured and our children will have prospects better than ours.

Background

Please refer to our booklet unCOMMON SENSE for a narrative on history and additional perspective on the campaign platform. At the campaign site, refer to .pdf downloads on The National Interest Platform and Tax Policy for much more detail.