It is time for a fresh start.
The most compelling evidence for the President to take a new direction is his “jobs gap” which surpassed one-million in August. According to the St. Petersburg Times the American economy needs to create 292,000 jobs a month beginning in February 2010 to reach 5% unemployment by 2015. Today, the Obama jobs gap has widened to 1.3 million jobs.
Unemployment Day weekend will mark the official end of the Obama administration’s “Recovery Summer”. 14.9 million Americans are unemployed. 6.2 million people have been out of work for more than six months. And, over 450,000 people are filing unemployment claims each month. Yet, the White House continues to tout the $862 billion stimulus as a success.
As the President himself has noted, small businesses were responsible for over 60% of all jobs lost in the last three months of 2009. Elsewhere in the economy, home construction has fallen and businesses continue to keep investment capital on the sidelines.
In its most recent Small Business Survey, American Solutions entrepreneurs cited the federal government as the #1 culprit when it comes to imposing the most burdensome taxes or fees. In addition, twenty-seven percent (27%) of small businesses lose more than 10 hours per month complying with state or federal government requirements or regulations.
Employers are hesitant to invest in new employees if they are unsure if there will be tax increases or new costs from healthcare reform. What drives success for entrepreneurs is certainty and policy that encourages growth with low costs, minimal regulation, predictable tax rates and a highly trained and skilled work force.
Early in his administration the President tried the opposite approach and failed miserably. President Obama pressed Congress to pass an $862 billion massive government stimulus package and a $1 trillion health care entitlement program. There has been no job creation as a result of either. Not to be outdone, Senate Majority Leader Harry Reid plans a lame duck session for the U.S. Senate to consider a new national energy tax. This proposal is estimated to kill 5.1 million jobs over the next 40 years and cost the American economy $125.9 billion per year, or $1,042 per household.
As the President considers what to do next, he should turn to an already existing jobs plan that has been introduced in the U.S. House: the Economic Freedom Act of 2010 by Ohio Congressman Jim Jordan and Utah Congressman Jason Chaffetz
The plan is straight forward. Lower taxes and make the United States the most competitive country in the world for new business investment. The legislation reduces payroll taxes by fifty percent for both the employer and employee for one year, allowing for greater take home pay for individuals and more money for companies to hire new employees and make new capital investments.
To spur manufacturing, the plan allows small firms to expense 100 percent of the cost of new purchases. To make the U.S. more competitive, the legislation reduces the corporate income tax rate to 12.5 percent and completely eliminates the capital gains tax. These two bold tax reforms will be an enormous boost to productivity and stop jobs from going overseas by making the United States -- not India or China -- the best place in the world to start and run a business.
Finally, the plan permanently eliminates the Death Tax and its perverse double taxation of family business generated wealth, which will be a tremendous incentive to continue the growth of small firms from one generation to the next.
Economic certainty, not arbitrary rulemaking, is what the American entrepreneur needs from its government. If Congress and the President want to do something to help the economy this fall, they should permanently lower the tax burden on economic productivity. If not, it’s likely the voters will permanently eliminate the current big spending Congress.
Newt Gingrich is the Former Speaker of the U.S. House and General Chairman of American Solutions. Dan Varroney is its Chief Operating Officer and a co-author of To Save America, Speaker Gingrich’s recent book.
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