Issues
Jobs and the Economy
There are three basic principles that we believe will create a robust economy and generate prosperity in society: 1.) Government depends on economic growth, 2.) Free markets create wealth, 3.) Sound Government creates a sound economy.
No matter what your agenda is – better health care, good schools, a strong defense, environmental quality, debt reduction – it depends on the economy growing robustly over time. Policies which discourage economic growth hurt everyone; they might in some cases be justified, but they have a downside everyone should recognize.
2.) Free markets create wealth
Free markets produce wealth far better than government does. One of the great lessons of the 20th Century was the efficacy of free markets, as compared to government dominated economies, in generating economic growth. Those who doubt this should compare China’s economy before 1990 and afterwards.
3.) Sound Government promotes a sound economy
A government that performs its core functions – maintaining a civil justice system, national defense, good schools, modern infrastructure — we can help create the conditions for prosperity by sustaining the legal and social framework that free markets need to operate. But where the government takes too many resources through taxation or costly regulations, debases the currency through excessive borrowing, or interferes with decisions that individuals or businesses should make, it stifles job creation and economic growth.
Federal spending and the debt
Congress has spent an unprecedented amount of money in a very short time. According to the Congressional Budget Office (CBO), Congress passed just four measures in the space of six months — Troubled Asset Relief Program (TARP), the stimulus package, and the ’09 and ’10 budgets — that added $4 trillion to the debt in the short term and additional obligations over the intermediate term that will cause the debt to grow from 41% of the GDP in late 2008 to 82% of the GDP in 2019.
While some economists have suggested that deficit spending stimulates the economy, it was Larry Summers, President Clinton’s Secretary of the Treasury and currently Director of the National Economic Council under President Obama, who said in January 2008: “Poorly provided fiscal stimulus can have worse side effects than the disease that is to be cured… Fiscal stimulus, to be maximally effective, must be clearly and credibly temporary—with no significant adverse impact on the deficit for more than a year or so after implementation. Otherwise it risks being counterproductive by raising the specter of enlarged future deficits pushing up longer-term interest rates and undermining confidence and longer-term growth prospects.”
The European Union does not permit new nations to join the Union if their total debt is more than 60%of their GNP. America’s total debt will climb to an estimated 90.4% of its GDP by the end of 2009, and according to the government’s own numbers, will reach 100% of GDP by 2011 and will grow thereafter. This means that our government’s finances are so unsound that the United States would not be allowed to join the European Union.
It is possible to balance the budget while providing services for which the government is responsible. How can we be sure? It actually happened in the 1990s, when Republican Congresses and the Clinton Administration agreed on policies that produced budget surpluses in the years 1998 through 2000.
A final point: One of the most frustrating aspects of the recent surge is spending is that the money has not been used to pay for what either party believes is a priority of the government. For example, none of the money was used to shore up social security or modernize America’s military, and only a fraction of it was spent on restoring America’s crumbling transportation infrastructure. It wasn’t even used for what the Administration now says is its most important priority — healthcare legislation. How could our government have effectively used up the remaining credit reserve without funding its own priorities?
Health care
As Alan Greenspan once said, “people are entitled to their own opinions, but they are not entitled to their own facts.” The key facts that should be the foundation of health care reform are the following:
2.) Government estimates track Medicare and Medicaid expenditures are growing at approximately 7% per year – a rate that is unsustainable. Reforms should be adopted that slow that growth rate. The money saved through these reforms should not be used as a bill payer for other programs; it must be used to sustain the existing programs, especially given that in the next decade millions of baby boomers will retire, putting additional pressure on Medicare. The lives of tens of millions of elderly and lower income Americans depend on protecting, and if possible improving, Medicare and Medicaid.
3.) The economy must be prosperous over the long term to fund the priorities, public or private, that we all want. No one should believe that higher taxes are good for economic growth.
All of this means that the government should carefully seek health reforms that
- Slow the growth rate of Medicare and Medicaid without hurting their quality and without using the money saved to fund other programs.
- Empower people who are currently uninsured to get private healthcare.
These reforms should be done in a way that will not raise taxes on anyone or substantially increasing government spending.
One such reform is legislation allowing small businesses to join together through their trade association and buy health insurance as part of national pools called Association Health Plans or AHPs. AHPs are not a government program and they require no taxpayer subsidy, but they would lower the cost of health insurance to small business and therefore reduce the number of uninsured by millions.
None of the proposals currently under consideration in Congress come close to meeting the standards we have set forth. They all raise taxes; they all expand the number of people on government health care; and they all use Medicare as a bill payer.
In January, 2010, AFEF partnered with the Heritage Foundation to host a forum for St. Louis physicians to discuss the pending health care reform legislation. Dr. Robert Moffit his perspective on free market solutions.
Cap and Trade
The cap and trade proposal passed by the House of Representatives raises the cost of energy, and in particular electricity and gas. That is its whole purpose: to force the American economy to pay more for energy, and thereby use less of it, with the object of reducing greenhouse gas emissions.
Now, that is bad enough by itself. But if our government deliberately increases the cost of energy in the United States, and other governments do not do the same thing in their own countries, what will be the effect? Other nations, particularly China and India, will gain the jobs we lose; their economies will grow as ours collapse. These nations have fewer environmental regulations and safeguards than the United States.
The effect of cap and trade legislation here, at least unless it is accompanied by similar measures in other countries, will hurt the American economy. Cap and trade will move more jobs offshore, and increase (rather than decrease) global greenhouse gas emissions. That is precisely why the United States Senate, in 1997, voted 95-0 not to enact global warming legislation that burdened our economy unless other nations did the same.
Remember principle number one everyone has a stake in prosperity. We can’t accomplish anything we want to achieve as a society without economic growth. That includes improving the environment. Congress should seek ways of encouraging both economic growth and newer and cleaner forms of energy.
