The Revealing Moon Debate
On January 25, Speaker Gingrich proposed that the U.S. government build and maintain a colony on the moon. He was promising the moon in order to get votes in Florida from those who work for NASA and its contractors.
The next day, the Florida Republican debate occurred. It was too soon for the candidates to focus-group their positions; as a result, their arguments in the debate revealed how they actually think. (Click here to watch this portion of the debate.)
Gingrich: The Big Idea Man
The most creative part of Speaker Gingrich's proposal was his method for involving entrepreneurs in the venture. He is aware that NASA has been deteriorating over time to the point where it cannot even get satellites up into space. Gingrich would largely replace NASA with contests. In the debate, he said:
I believe, by the use of prizes, by the use of incentives, by opening up the space port so that it's available on a ready basis for commercial fight, by using commonsense, for example the Atlas-V could easily be fixed into a man capable vehicle so you didn't have to rely on a Russian launch or a Chinese launch, there are many things you can do to leverage accelerating the development of space. Lindbergh flew to Paris for a $25,000.00 prize. If we had a handful of serious prizes, you'd see an extraordinary number of people out there trying to get to the moon first in order to build that. And I'd like to have an American on the moon before the Chinese get there.
While Gingrich's idea of using prizes to encourage space exploration is a good one, his idea of spending a huge amount of money on a moon colony at this time is a bad one. In the light of his other expensive campaign promises, it shows that he may not be serious about balancing the federal budget.
Already our government owes more than all Americans earn in a year. If the national debt continues to grow, interest rates will eventually rise, and the government will be forced to choose between defaulting on its debt and trying to inflate it away. Either choice would be economically disastrous.
Gingrich's economic plan is filled with bad ideas as well, including his plan to eliminate the capital gains tax altogether. Instead, capital gains should be taxed fully as ordinary income if consumed, or not taxed at all if the entire proceeds are reinvested. Although business tax cuts encourage business investment, capital gains tax cuts mainly encourage speculation, the sale and consumption of assets, and disinvestment. Clinton's capital gains tax elimination on houses in 1998 contributed to a speculative bubble. G.W. Bush's capital gains tax cut in 2002 set off a corporate stock-buyback spree.
And Gingrich still supports Clinton's mistake of admitting China to the WTO and giving it "most favored nation" trading status, a decision which is largely responsible for an entire decade of declining median income (due to the loss of well-paying manufacturing jobs). He believes in free trade, even when our trading partners give powerful incentives to American firms to outsource their factories.
When trade is balanced, all countries benefit because jobs lost in one industry will be made up for by even better-paying jobs in another. But the Chinese government uses currency manipulation and limits imports to gain a trade surplus. China gets jobs, and we get debt.
Paul: The Government Shouldn't Be Involved
In his debate response to Gingrich's proposal, Rep. Paul reiterated his general position that the U.S. government should be involved as little as possible in the U.S. economy. Specifically, he argued that there should not be a U.S. government space program, except to the extent that there is a defense need for space ventures. He said:
If we had a healthy economy and had more Bill Gateses and more Warren Buffetts, the money would be there. It should be privatized, and the people who work in the industry, if you had that, there would be jobs in aerospace. And I just think that we don't need a bigger, a newer program, when you think of the people -- I mean, health care or something else deserves a lot more priority than going to the moon. So, I would be very reluctant, but space technology should be followed up to some degree for national defense purposes, but not just for the fun of it and, you know, for -- you know, for scientific-- [Here Paul was cut off in mid-sentence.]
Paul's economic plan is filled with a similar desire for less government. On the positive side, he has put together a serious plan to balance the budget through massive spending cuts. On the negative side, he is a proponent of the pre-depression Austrian school of economics, which means that he hasn't learned the chief lesson that the University of Chicago economists (led by Milton Friedman) drew from the Great Depression -- that the government should maintain a constant growing money supply. He would probably repeat President Jackson's depression, which was caused by returning the U.S. to a strict gold standard.
And Paul hasn't learned the economic lesson of the current economic stagnation. He would continue to give away American industry to foreign governments as a reward for intervening in the dollar-exchange market. He is against big government, but only if it is the U.S. government.
Romney: Space Program Should Help the Economy
In his debate response to Gingrich's proposal, Gov. Romney focused upon the expense of Gingrich's plan and what it would do to the federal budget. He said that, as president, he would bring together academic and military experts and the business community to put together a plan for space that would benefit the American economy. Specifically:
I'd like to bring in the top professors that relate to space areas and physics, the top people from industry, because I want to make sure what we're doing in space translates into commercial products.... I'd like to come together and talk about different options and the cost. I'd like corporate America as well as the defense network and others that could come together in, if you will, a partnership basis to create a plan that will keep our space program thriving and growing. I believe in a manned space program. I'd like to see whether they believe in the same thing. I'm not looking for a colony on the moon, I think the cost of that would be in the hundreds of billions, if not trillions. I would rather be rebuilding housing here in the U.S.
Romney's space program would be a "partnership." Our quixotic attempt to prevent global warming is also a partnership, in which nearly all the capital and risk are borne by government.
But on the good side, Romney understands that balancing the budget is key to America's long-term economic prosperity. He understands that the United States faces a serious economic and military challenge from China, which he would address it by taking on China's trade cheating and stealing of American technology. But he limits his trade balancing measures to China, even though most of the other emerging market countries are copying China's successful strategy.
Santorum: Do What Is Best for Our Children
Sen. Santorum's response to Gingrich's proposal revealed that our children's long-term future is at the heart of his thinking. He began by saying that he likes the way our space program helps inspire our children to achieve in science and mathematics. Then he continued by pointing out that Gingrich's proposal would be a budget-breaker. He said:
One of the big problems we have in our country today is that young people are not getting involved in math and science and not dreaming big dreams. So NASA or the space program is important.... But let's just be honest, we run a $1.2 trillion deficit right now. We're borrowing 40-cents of every dollar. And to go out there and promise new programs and big ideas, that's a great thing to maybe get votes, but it's not a responsible thing when you have to go out and say that we have to start cutting programs, not talking about how to grow them. We're going to cut programs. Under my administration, we're going to spend less money every year -every year, year, to year, to year the federal government amount of spending will go down for four years until we get a balanced budget[.]
Similarly, Santorum's economic plan is designed to benefit America's children. In order to create good jobs in the manufacturing sector, he would cut the corporate income tax from 35% to 17.5% and eliminate it completely for American manufacturers. Unfortunately, he has not yet figured out that you can't get companies to build factories in the United States with a low corporate income tax unless the builders of those factories think that they will earn income.
U.S. manufacturing investment will not resume until the United States requires balanced trade through a scaled tariff or some other similar measure. We believe that the scaled tariff is authorized under WTO rules and can be implemented by a simple presidential order. Santorum's plan would produce a tremendous economic boom, if he figures out that he needs to require balanced trade.
Their Economic Plans
Unfortunately, each of the Republican Final Four is missing one or more key components from his economic plan:
- Although Gingrich claims that he wants to balance the budget, his proposals would increase spending and cut government revenue. Also, he would not do anything to balance trade.
- Although Paul would balance the budget, he would also end balanced monetary growth by returning to the gold standard. Also, he would not do anything to balance trade.
- Romney is serious about balancing the budget. Although he would tackle China's trade cheating, he would let the other emerging market countries continue to gain a balance of trade favorable to themselves.
- Santorum would balance the budget by holding the line on government spending and would promote investment through sizable business tax cuts. His plan would produce an economic boom -- if he also required balanced trade.
None of these candidates is perfect. But we believe that their policies would all be better for the U.S. economy than the policies pursued by President Obama, who appears to have bought the mistaken ideas that (1) running huge budget deficits stimulates the private sector and (2) that production of expensive energy benefits the economy.
Economic growth is achievable. All that is needed are reasonably balanced budgets, stable monetary growth, and either balanced trade or a trade surplus.
The authors maintain a blog at www.idealtaxes.com and co-authored the 2008 book Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before it's Too Late, published by Ideal Taxes Association.