Kellogg column: Trump must lead economic reset
Washington, D.C., is drowning the United States in debt and killing economic opportunity. During the past eight years, federal government growth and spending have been rampant. The Federal Reserve Bank has delayed a meltdown by printing money and suppressing interest rates.
On Jan. 20, the Trump administration must initiate an economic reset. It should start with reforms to U.S. tax code and energy policy, as well as health care and entitlements.
The term “economic reset” is borrowed from Larry Van Buskirk, a business leader and economist from Michigan, who said a reset is imperative for America’s economic survival. He pointed out that under President Obama, the national debt nearly doubled to $20 trillion, four times the U.S. gross domestic product. Since 2008, real estate prices have increased 35 percent while average household income has declined. Without a reset, we’re doomed as global recession looms.
Any economic reset must include reforms to U.S. tax policy to unfetter commerce, job creation and economic growth. Excessive taxes damage economic vitality within our borders and hinder our ability to compete in the global marketplace. The corporate tax rate of 35 percent on American businesses is the highest in the industrialized world. A typical working family fares no better, with an income tax rate between 15 percent and 25 percent, as well as payroll taxes of about 15 percent.
The Trump administration should push Congress to replace individual income tax with a flat tax of 15 to 20 percent. Capital gains and estate taxes would be eliminated. Businesses should be subjected to the same tax system. All the loopholes, deductions and exemptions should go away. Analysis by the Heritage Foundation indicates this flat tax rate would raise more revenue than the current system. American businesses would be more competitive, and take-home wages would be higher for workers.
A comprehensive energy policy is vital to prevent the detrimental effects of high energy prices on households and businesses. Cap-and-trade laws and renewable energy mandates drive hydrocarbon-based energy prices higher. At the same time, “green” energy subsidies consume taxpayer dollars. Such policies force Americans into niche energy options, such as wind and solar, which are otherwise too expensive and unreliable to be commercially viable as primary power sources.
The United States has nearly 30 percent of the world’s known coal reserves. More than 2 quadrillion cubic feet of natural gas is below United States soil. Alternatives like solar and wind should be accurately presented as supplemental sources of energy. Congress and state governments must remove excessive regulation, as well as end subsidies and incentives for any alternative. Competitive energy prices and plentiful supply are dependent on a free market with reasonable regulation.
An economic reset must curb federal government spending. Massive amounts of household income and taxpayer dollars are being spent on health care. The Patient Protection and Affordable Care Act, better known as Obamacare, will cost more than $2.5 trillion over the next decade. It’s also projected to increase the national debt by at least $350 billion during that period. Obamacare will add 16 million people to the ranks of Medicaid, a program already on the brink of insolvency.
President Trump must initiate a repeal of Obamacare and replacement with a more affordable program that preserves patient choice and health care quality. A better approach would be age-adjusted premium support to help citizens purchase health insurance in the private market. Competitive prices will require insurance markets that are not confined by state boundaries.
The real U.S. spending crisis lies in the combined entitlements of Social Security, Medicare and Medicaid. An estimated 77 million baby boomers, born between 1946 and 1964, are flooding into these programs. According to the most recent Social Security and Medicare trustees’ report, the unfunded liabilities of these programs exceed $120 trillion.
The Trump administration must make entitlement reform a top priority. A phased increase in the normal retirement age is unavoidable for those currently younger than 55. Medicare should be changed to a “defined contribution” system in which government makes direct contributions to competing free-market health care plans, rather than “covering” treatment costs. And the amount of federal contributions to state Medicaid programs must be reduced.
The global economic bubble is about to burst. The major economic nations of the world are in worse shape than the United States. On the home front, discretionary spending is slowing and interest rates are rising. When debt-leveraged foreign governments can no longer buy more U.S. debt, interest rates will soar, spelling doom for the U.S. equity market. To survive, an economic reset better start on the first day of the Trump presidency.
James D. Kellogg is an engineering consultant and the author of “Radical Action: A Colt Kelley Thriller.” Look for the novel on amazon.com and visit JamesDKellogg.com or email firstname.lastname@example.org.