In this post I continue a discussion of the advice to Reagan memo that The Wall Street Journal excerpted a few days ago.
On the matter of budgeting, the memo advised, in the context of fighting then-high inflation
Many question whether you are serious about a sizeable cut in budget outlays. Credible FY 1981 and 1982 budgets which do that clearly and unambiguously would evoke an extraordinary response in the financial markets, and set the stage for a successful assault on inflation and a decline in mortgage and other interest rates.
This is sound advice for the next President, also. Credible FY2013 (since the Progressives in the Senate and White House have variously refused to offer a serious budget or any budget at all for the last three years, a 2013 budget for the fiscal year then in progress will remain a necessity), FY2014, and FY2015 budgets will be as critical in demonstrating resolve in cutting irresponsible spending as it was in fighting inflation. And it will be critical in reducing the impact of the inflation time bomb the Fed is creating, should that go off before it can be defused.
Those advisors continued in their section on the Budget:
Off-budget financing and government guarantees mount and expand programs through the use of the government’s borrowing capacity, draining the nation’s resources without being adequately recorded in the formal spending totals.
Pop quiz time: what off-budget financing and government guarantees are present today? Bonus question: what does the continued existence of off-budget financing and government guarantees of any sort say about the sense of responsibility felt by incumbents of a Big Government?
The Reagan advisors also warn of this:
In addition, the mandating of private expenditures for government purposes has gained momentum as the spotlight has [i]lluminated direct spending. These mandates are also a clear call by government on the nation’s resources.
Boy, has it ever gained momentum.
Closely related to budgeting is tax policy.
Tax policy is properly the province of your Secretary of the Treasury.
Indeed. And the inability of the present Treasury Secretary to pay his own taxes says far more about the unnecessary scope and complexity of current tax law than it does about his intelligence or sense of responsibility. If we assume Geithner isn’t a tax scofflaw—and I believe he is a fundamentally honest man—his mistake should be a clarion call for simplification. That it is not speaks poorly of the incumbents on both sides of the aisle.
Reagan’s advisors continue:
We consider that the key ingredients should be your proposals for the Kemp-Roth cut in personal income tax rates, simplification and liberalization of business depreciation and a cut in effective taxes on capital gains…. Consistent with your proposals earlier this year, the effective date for these reductions should be January 1, 1981.
Other key proposals are…reductions in…inheritance taxes and the taxation of Americans living abroad….
Again, these are remarkably prescient. The Obama tax increase is set to take effect on January 1, 2013. That increase, aside from raising income taxes on ordinary Americans smack in the middle of the present recession, will include jumps to usurious rates on what those same ordinary Americans would otherwise leave to their own children and other heirs of their choice—not of government’s choice. Moreover, most sub-Federal jurisdictions only tax income earned within their jurisdiction. Why should the Federal government be any different?
The Obama tax increase also includes major increases in business-related taxes: investment taxes on capital gains and increasing the double taxation present on dividend payouts. These will serve only to reduce investment in American businesses, to the detriment of our already suffering economy.
I’ll have more in the coming days.