• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • The American Option

    specialamo.jpg

    Last Thursday in a speech at The Heritage Foundation, Sen. Jim DeMint (R-SC) unveiled his “American Option” alternative to President Barack Obama’s Trillion Dollar Debt Plan. From DeMint’s speech:

    The Democrat bill takes money–actually, it bor­rows money–and decides where it should go. It does virtually nothing to stimulate the economy while it wastes billions of taxpayer dollars. It’s a hodge-podge of long-supported pet projects that the normal budget process would have thrown out. Using the troubled economy as their motive, Dem­ocrats have opened the floodgates for all sorts of outrageous wasteful spending.

    This bill is not a stimulus, ladies and gentlemen; it is a mugging. It is a fraud. Conservatives who fear proponents of this bill want to inch our economy closer to European-style socialism are kidding themselves. The proponents of this bill want to strap a big rocket on the back of our economy and launch it all the way to Brussels!

    Fortunately, there is another way. A better way. A way that will actually stimulate the economy, spur investment, and create jobs. A way that will perma­nently keep billions of dollars–immediately–in the private sector: in the hands of Americans who buy goods, provide services, start businesses, and hire employees.

    Instead of taking a trillion dollars out of the economy so politicians can spread it around to spe­cial interests, the American Option will keep a tril­lion more dollars in the hands of American workers and businesses. Instead of growing government, where waste and corruption run rampant, we grow the private sector, where innovation flourishes. Instead of giving the power and control of our econ­omy to politicians and bureaucrats, we give Ameri­cans and small businesses the freedom to spend and invest their own money.

    The evidence in support of this legislation is not theoretical but historical, unlike the Keynesian arguments in favor of the Democrats’ debt plan. John F. Kennedy’s 1964 tax reductions led to 9 mil­lion new private sector jobs in five years. Ronald Reagan’s 1981 tax cuts led to 7 million in the same time frame. And five years on, the 2001 and 2003 tax cuts have led to the creation of 4 million and 6 million jobs, respectively.

    Every time the United States has cut marginal tax rates, millions of jobs have been created–jobs that lifted the unemployed into the workforce, the work­ing poor into the middle class, and the middle class into long-term economic security.

    Posted in Ongoing Priorities [slideshow_deploy]

    4 Responses to The American Option

    1. Peter Asher .. Orego says:

      Cutting taxes does stimulate as future after-tax earnings become higher but this will be too little, too late. The massive service of debt load that bled off consumer spending power will still be present. Spending power would evolve SLOWLY from whatever future earnings continue to be generated.

      For $ 820 billion we could do one, easy to administrate act that would:

      Instantly jump start the economy to the tune of 6% GDP.

      Create absolute additional tax revenue equal to the median income tax paid on $850 billion plus the additional tax revenue generated by a high monetary velocity rebound of the economy.

      End all homeowner foreclosures for a year and resurrect mark-to-market values of mortgage debt.

      Increase mortgage capital and eliminate the need for refinancing, thereby freeing up all available mortgage funds for resuscitating the nearly dead housing industry.

      How?

      Every primary residence homeowner submits his mortgage documents to the stimulus fund and the fund pays 12 months of mortgage payments DIRECTLY to the bank or mortgage service entity.

      Freed up from the major portion of homeowner debt service, people will have the funds to spend or invest across the FULL SPECTRUM of the economy. Nothing will need to trickle down, up, or sideways! Business and the stock market will rebound, rehiring will swiftly occur and depressed government revenues will grow again. The excess housing inventory will not be added to and will be absorbed to make way for new construction to be marketed. A re-occurrence of the housing bubble can be prevented by the stricter qualifications now in place along with enacting regulatory and tax policies to curtail “flipping” and most of all by making mortgage originators responsible for the loans they underwrite.

      As people will no longer need additional credit to make ends meet or acquire new goods and services there will be less demand for lending and interest rates will fall creating additional stimulus to the broad economy.

      Finally, the cost of financing the rescue package will be mitigated by declaring that the twelve months payments, coming from the government and not from the taxpayer, therefore do not qualify for the tax deduction on principal residence interest payment. What will help the plan be palatable is that those who are struggling with shrunken incomes will have little or no to tax to pay while those who are still earning well will be paying back their top income bracket’s percentage, but not until it is are due. Meanwhile they will have put those funds through spending or investing functions.

      Another, albeit small, bonus will be that the advanced payment will create an extra reduction in principal equal to the interest rate percentage times one half of the twelve months of interest paid.

      If anyone sees any downside to this, (Other than that those behind the “Agenda” would fight it tooth and nail) I would really like to hear about it!

      Here or @ http://takeamericaforward.com/

    2. Kyle S says:

      good chart – but FYI take the "$" off of the 2.2 million jobs created by the DeMint plan and the -0.2 percentage points figures (rows 2 and 4)

    3. pacific_waters says:

      WHy does everyone want to make it more complicated than it needs to be? We are trying to get people to spend money. Give every taxpayer a moratorium on payroll deductions for a month. They'll figure out how to spend it.

    4. Pingback: The President is Wrong. America Hates His Bill and Wants Tax Cuts Now. : The Sundries Shack

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×