WHAT SHOULD America’s economic and foreign policy look like in the next two years, four years, and the next generation?
Herewith a baker’s dozen policy recommendations:
Don’t change the rules. The modern Democrat Party is facing a secular decline. The Janus Supreme Court case ruled that twenty-three blue states could no longer require government workers to pay union dues (or fees). That is a body blow to Democrat political funding. Private sector unions now take dues from only 7 percent of workers—down from 35 percent in the 1950s and 20 percent in the 1980s.
Increasing numbers of Americans own stock and are repulsed by class warfare arguments. The Supreme Court is no longer pushing the nation leftward. Democrats outlined a “Hail Mary” agenda to put themselves back into the semi-permanent majority they wielded in Congress from 1932 to 1994 when in sixty-two years Republicans controlled the House for only four years and the Senate for only ten years. The “must have” new rules included: packing the Supreme Court; expanding the number of states to gerrymander the U.S. Senate; abolishing the filibuster, which required supermajority (60 percent) support for major change; making elections more open to fraud by not requiring ID to vote or signatures on mail-in ballots; and so on. Without one party control of the House, Senate, and White House, Democrats cannot change these rules. But Republicans must be careful to examine all legislation for hidden changes in the rules.
Maintain the lower corporate and personal income taxes enacted in 2017. This part is easy as long as the GOP holds a majority in the Senate and/or House. Most Republicans have signed the Taxpayer Protection Pledge, promising their constituents that they will “oppose and vote against” any and all tax increases. The reduction of the corporate rate from 35 percent (higher than communist China’s 25 percent) to 21 percent in 2017 led to strong economic growth. The median family income rose in 2018 alone by 6.8 percent. The unemployment rate for all Americans fell to a historic fifty-year low of 3.5 percent by spring 2020, just before the coronavirus-inspired economic shutdown unemployed 20 million Americans. Yet, the underlying low-tax, reduced regulatory environment allowed the economy to recover quickly. By election day 2020, unemployment fell from 14.7 percent to 6.9 percent. That compared favorably to Obama’s unemployment rate of 7.9 percent as he ran for re-election in 2012.
The 2017 tax reform also eliminated the tax deductibility of state and local taxes of more than $10,000 from one’s taxable income for federal income tax purposes. This ended a significant subsidy for high-tax cities and states at the expense of states with low taxes. This puts pressure on high-tax states like California, New York, New Jersey, and Connecticut to limit their abusive tax rates, which has driven 12 million of their residents to other states over the past decade.
End the double taxation of Americans working overseas. The United States and Eritrea are the only two countries that tax individuals for work they do while living in another country. The United States has a worldwide tax system. The rest of the world, minus Eritrea, has a territorial tax structure. Republicans ended the double taxation of American corporate income in the 2017 bill. Several trillion dollars of U.S. corporate earnings were trapped overseas, unable to be repatriated to the United States lest they pay an American tax penalty. That ended, and trillions were made available for investment in the United States.
Now America should leave Eritrea all alone and end the double taxation on individuals. There are 5 to 8 million Americans working overseas, and they pay billions each year in excess U.S. taxation. As a result, it costs more to hire an American than a German in France because the American must be compensated for his higher (American worldwide) tax burden.
Protect the three million students now in charter schools and help the one million more hoping to go to a charter school. Joe Biden and every Democrat running for president promised the teachers’ unions that he would end federal support for charter schools. The unions are hoping to close such schools and force parents back into the unionized public-school system they worked so hard to leave.
Pass a highway bill only once the lengthy permitting delays have been cut in half. It now takes four-and-a-half years to build a new road or even widen one. Reducing the unnecessary permitting time would save taxpayers billions. The Trump administration urged a reduced permitting time to two years. That is the start of any reform to “infrastructure” spending.
Restore America’s immigration advantage. In the past, nations built navies and fought wars over control of silver, gold, coal, and oil. Today, the most valuable commodity for a nation to accumulate is talent—human capital. And America has an advantage: the most talented, educated and trained men and women on the planet want to come to America to work and live. We do not need to conquer land or control sea lanes. We just need to say yes, and welcome the flood of talent prepared to come to America and create wealth and jobs for America and themselves.
End identify politics/racial discrimination and quotas. On election day, the largest state in the nation, California, voted 55-45 to maintain their stated ban on racial discrimination in employment and education. The ban was enacted by a popular initiative in 1996 known as Prop 209. With this rejection of racial quotas in a vote of the people, the Supreme Court is more likely to be comfortable ruling that all racial quotas and discrimination by the government is unconstitutional. This would be a body blow to the identity politics of the Left.
Protect independent contractor law. The Democrat House in 2020 passed the PRO Act which rewrites independent contractor law and effectively bans Uber drivers, freelancers, and gig economy workers from being self-employed. They would have to have a boss. California’s legislature voted on such a ban at the state level and this November 3, Californians overwhelmingly rejected the attack on independent contractor status. This makes it less likely other states will follow California’s model and is a shot across the bow of similar efforts reviving in Washington.
Broaden the investor class. The politics of class division and hatred aimed at the “one percent” has become less viable as we now have more than 100 million Americans with a 401k or IRA or other tax-advantaged defined benefit pension plans. Donald Trump’s tax cut reduced the corporate rate. As a result, 100 million Americans saw their life savings increase. A Biden tax hike on corporate income would reduce the life savings of those 100 million. The number of Americans with visible life savings vulnerable to attack by higher taxes on businesses know that to damage Bill Gates, Biden would first have to step on their retirement savings.
Index capital gains to inflation. President Trump has the authority to define the “cost” of an asset when calculating capital gains taxes as the original sale plus inflation. The average stock sale price is 40 percent inflation gain. There is no reason people should pay capital gains taxes on inflation.
End Wars of Choice, including trade wars. Tariff wars are wars of choice. Tariffs are taxes. American tariffs are paid by American consumers. All the casualties in a trade war are hit by friendly fire. Yes, we should work to get China to stop stealing our intellectual property. But our weapons should be ones that impose costs on the Chinese government, not the American consumer.
Anti-Appropriations Committee. We have a Senate and House appropriations committee dedicated to spending money. Congress should restore the “anti-appropriations” committee which, during World War II, recommended budget cuts to Congress. These eliminated the Civilian Conservation Corps and the Works Projects Administration, and saved $40 billion in today’s dollars.
Rein in entitlement spending. This requires a GOP House, Senate, and presidency. A project for the 2024 election. Former Speaker Paul Ryan’s plan would block grant the major welfare programs to the states.
Contain China and wait. The United States, since the Revolutionary War, has never fought a nation that had more than 40 percent of our GDP. China is a different threat than Germany or Japan in WWII, or even the Soviet Union. China is, however, facing a demographic change, where from 2015 to 2040 the number of Chinese below age 55 will fall by 250 million and the number older than 55 will increase by 250 million. Fewer workers, more retirees. America should ratify the Trans-Pacific Partnership to strengthen our economic ties with China’s neighbors.
Grover Norquist is President of Americans for Tax Reform.