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By Peter Ferrara on 12.28.11 @ 6:08AM http://spectator.org/archives/2011/12/28/the-case-for-newt-gingrich How easily his great and solid conservative achievements are forgotten. He led us to victory before. Spectacular, historic victory. The strategy and content of his 1994 Contract with America propelled the Republicans to a 54-seat gain in 1994 to win control of the House of Representatives, which had been held by the Republicans for only two out of the previous 62 years. Even the Reagan Revolution in the 1980s failed to achieve that. Then, for all the caterwauling we have heard about how he handled the budget battles with Clinton, he led the House Republicans in 1996 to their first re-election as a majority since 1928, almost 70 years. Moreover, once in power, Gingrich delivered on his promises, and maintained a solid conservative record. He carried out the Contract with America in full, holding a vote on every item as promised, most of which did pass (which was not promised). His record was unswervingly pro-life, pro-gun and Second Amendment, and anti-tax. Indeed, he worked closely with the conservative activist groups on every one of these issues. Gingrich's Balanced Budget: Succeeding Where Bush Failed Contrary to the untouched by reality liberal/left talking points about how the 1993 Clinton tax increases led to balanced budgets, when the Gingrich majority took power in 1995, it was greeted by the 1996 Clinton budget still projecting $200 billion annual budget deficits as far as the eye could see, totaling $2.7 trillion over 10 years, confirmed by CBO. The House passed a budget bill providing for $1 trillion in spending cuts over the next 10 years, and that was almost 20 years ago when $1 trillion was still real money. In the government shutdown budget battles with Clinton, Gingrich won the substance, as Gingrich demonstrated the only way to balance the budget, with Reagan's supplyside economics. That involved both cutting taxes, to get the economy booming, and cutting spending, resulting in the longest period of federal surpluses since the 1920s. This is what the official government records show. You can dig deep into the records at omb.gov yourself. Total federal discretionary spending, as well as the subcategory of non-defense discretionary spending, declined from 1995 to 1996 in actual nominal dollars. In constant dollars, adjusted for inflation, the decline was 5.4 percent. By 2000, total federal discretionary spending was still about the same as it was in 1995 in constant dollars. As a percent of GDP, federal discretionary spending was slashed by 17.5 percent in just four years, from 1995 to 1999.
Total federal spending relative to GDP declined from 1995 to 2000 by an astounding 12.5 percent, a reduction in the federal government relative to the economy of about one-eighth in just five short years. This was accomplished not just by reducing discretionary spending, but through fundamental structural reforms of some programs, such as the old AFDC entitlement program. The Gingrich Congress succeeded in block granting that program back to the states, after two vetoes from Clinton. After 10 years, the taxpayers saved 50 percent on the costs of that program, while the poor formerly on the program gained by going to work, with poverty among them plummeting. That is a model for future entitlement reform. As a result, the $200 billion annual federal deficits, which had prevailed for over 15 years, were transformed into record-breaking surpluses by 1998, peaking at $236 billion by 2000. Over four years, the national debt held by the public was reduced by a record $560 billion in surpluses. When Gingrich left office, instead of CBO projections of $2.7 trillion in deficits over the next 10 years, CBO projected surpluses of $2.3 trillion over the next 10 years. That is a positive turnaround in the budget of $5 trillion. This is exactly what we need today. These spending cuts were accomplished not with a deal with the Democrats to raise taxes, but with pro-growth cuts in tax rates. Gingrich led enactment of a capital gains tax rate cut of nearly 30 percent in 1997, from 28 percent down to 20 percent, which was the largest capital gains cut in American history. Despite that cut, actual capital gains revenues soared $84 billion higher for 1997 to 2000 than projected before the rate cut. The Republican Congress also expanded IRAs, and adopted other tax cuts on capital. Contrast that with the disastrous 1990 Bush/Darman/Sununu budget deal, trading permanent tax increases for supposed future spending cuts. The economy dropped into recession almost from the moment the deal was announced, with GDP declining 3.6 percent in the fourth quarter of 1990. That briefly ended the 92 straight months of economic growth of the Reagan recovery, almost 60 percent longer than any other peacetime expansion in U.S. history. As a result, federal tax revenues declined rather than increased, despite the tax hikes engineered by Bush budget director Richard Darman, intellectually dominated by the Washington Post and New York Times. Federal revenues had been running 18 to 18.4 percent of GDP before the budget deal, but they declined to 17.5 to 17.7 percent during 1991 to 1992. Pulitzer prize winning columnist Paul Gigot of the Wall Street Journal reported in January 1993, in a column entitled "Oops, Weren't We Going to Reduce the Deficit?" that the rich paid $6.5 billion less in taxes in 1991, after the tax rate hike, than they did in 1990 before rates went up. While the Joint Tax Committee had estimated the 10 percent luxury tax on boats, airplanes, cars, jewelry and furs would raise $6 billion in 1991, the actual revenue increase was $53,000. The lost revenue from laid off workers previously building luxury boats and planes was far greater. In the first two years of the luxury tax, 9,400 nonrich boat makers lost their jobs.
At the same time, federal spending rose rather than fell, climbing from 21.2 percent of GDP in 1989 to 22.3 percent in 1991 and 22.1 percent in 1992. In 1991 and 1992 federal domestic spending exploded by 20 percent. "Notwithstanding all the budgeters' talk of pain," wrote Howard Gleckman of Business Week after the budget deal was consummated, "spending at home is in for a windfall." Everything from Head Start to NASA to Medicaid to highway spending enjoyed beefy budget increases in this new austere budget environment. The deficit consequently soared from $152 billion in 1989, to $221 billion in 1990, $269 billion in 1991, and $290 billion in 1992, when the voters rightly booted Bush out for violating the no new taxes pledge that got him elected. As a Cato Institute report concluded: "The 1990 budget deal was not the deal of the century, but the crime of the century. It hurt the economy, reduced revenues, increased spending, and failed its ultimate test: it didn't reduce the budget deficit." But to this day, Washington budget experts want another grand bipartisan budget deal just like what happened in 1990. Ironically, Gingrich is being savaged by the Bush crowd now for his role in leading House Republicans in 1990 to reject the Bush budget deal. Bush White House Chief of Staff John Sununu, Sr. is bitterly attacking Gingrich as unstable for opposing the Bush budget deal circus. Former President Bush has endorsed Romney because he is not "a bomb-thrower," in Bush's words, a reference to Gingrich's refusal to lead House Republicans off the cliff with him. Gingrich's rebellion against Bush's 1990 betrayal of Reaganomics was his finest hour. That leadership is what led to the House Republican takeover in 1994. If conservatives and supply-siders do not rally around Gingrich now, and allow the Bush crowd to win with Romney, Reaganism will have been routed out of the Republican Party. Undoubtedly, John Sununu will pick Romney's budget director (remember his pick of Supreme Court Justice David Souter over the conservative alternative that would have given conservatives a firm majority on the Court). The first thing Romney will do if elected is exactly the reprise of the 1990 tax increase budget deal for which the Washington establishment that will run a Romney Administration is always pining. That will require another round of Democrats in the White House before conservatives can even get a chance at winning again, which America cannot survive at this point. Gingrich's Platform Besides Gingrich's proven record of conservative leadership, he is running this year on the most visionary free market platform of any candidate ever. It is all in writing at Newt.org. Gingrich is campaigning on the ultimate, supply-side, pro-growth, Jobs and Economic Recovery plan of cutting taxes and spending to balance the budget, just as he did in the 1990s. He is proposing the 15 percent optional flat tax plan of Steve Forbes and Steve Moore. He proposes corporate tax reform, closing loopholes in return for lowering the rate to 12.5 percent as Ireland did in 1988 to such great success.
He would eliminate the capital gains tax, the death tax, and the alternative minimum tax. He would allow immediate expensing for capital investment, like the deductions for all other business expenses, instead of dragging those deductions out over many years through arbitrary depreciation schedules. These tax reforms are explicitly not designed to be revenue neutral. They are designed to be growth maximizing, resulting in the most jobs and the most rapidly rising wages and incomes. The professional score of these reforms will be released this week, showing how the budget can be balanced with economic growth and spending cuts. Those would involve returning most budget line items to pre-Obama levels, and then freezing them there until budget balance. It would also involve abolishing all corporate bailouts and corporate welfare, and terminating, breaking up, or privatizing stale, outdated programs, like NPR, the Corporation for Public Broadcasting, AMTRAK, and Fannie Mae and Freddie Mac. It would include as well the most sweeping, long-term entitlement reforms ever proposed, which are also spelled out in comprehensive detail in writing at Newt.org. He would adopt and then expand an individual choice for personal savings, investment and insurance accounts for younger workers that would be expanded over time to finance all of the benefits financed by the payroll tax, as in Chile, ultimately displacing the payroll tax entirely. Gingrich would bring Jose Piñera from Chile to campaign for this idea across America, but especially among Hispanics, with the grassroots campaign targeted at younger workers and minorities that George W. Bush should have followed through with, but never did. Such personal accounts involve the biggest reduction in government spending in world history, as all that spending now financed by the personal accounts would ultimately be shifted to the private sector. Gingrich also proposes to expand his enormously successful 1996 AFDC welfare reforms to the nearly 200 remaining federal means-tested welfare programs, sending all federal welfare back to the states. The projected federal and state spending on these programs over the next 10 years is $10 trillion. Based on the experience with the 1996 reforms, that spending can ultimately be cut in half or more through these reforms. Gingrich would further slash taxes, spending and regulatory costs by trillions by repealing and replacing Obamacare with Patient Power. Those reforms would provide a health care safety net that would ensure access to essential health care for the uninsured at just a fraction of current costs, with no individual mandate and no employer mandate. You can just ask John Goodman at NCPA about that, who is personally advising Gingrich on health policy. I myself have been an unpaid close personal advisor to Gingrich for years. Taken together, these entitlement reforms would over the long run cut federal spending in half from what it would be otherwise, completely solving America's entitlement and fiscal crisis. That estimate reflects my life's work on entitlement reform and budget policy at the Cato Institute, the Heritage Foundation, NCPA, and now the Heartland Institute. The full discussion can be found in my book published last June by HarperCollins, America's Ticking Bankruptcy Bomb.
About the Author Peter Ferrara is Senior Fellow at the Carleson Center for Public Policy, Director of Entitlement and Budget Policy for the Heartland Institute, and General Counsel of the American Civil Rights Union. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under the first President Bush. He is the author of America’s Ticking Bankruptcy Bomb, now available from HarperCollins.
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