Gingrich Campaign Press Release - Gingrich Policies Would Create 6.6 Million Jobs in First Two Years; Balance Budget in First Term

Atlanta, GA — Newt 2012 Senior Economic Policy Advisor Peter Ferrara released the following topline summary of the official score of Newt's Jobs and Economy Recovery Plan, which predicts Gingrich policies would balance the budget within the first term of a Gingrich presidency and lead to 6.6 million new jobs created in two years:

Newt Gingrich has proposed a very aggressive, comprehensive, supply side economics, jobs and economic recovery plan. It features dramatically lower personal and corporate tax rates, the elimination of the capital gains tax and death tax, deregulation and sound monetary policy. The plan would especially roll back regulatory barriers to energy production, unleashing the private sector to maximize all forms of American energy production. Full details of the plan can be found in Appendix A.

Art Laffer, supply side economics guru and architect of Ronald Reagan's economic recovery package, has endorsed Gingrich's economic recovery plan as the most promising pro-growth package, saying, "Newt has the best plan for jobs and economic growth of any candidate in the field." He predicts that the plan "would create a boom of new investment and economic growth leading to the creation of tens of millions of new jobs over the next decade."

To demonstrate the impact of Newt Gingrich Jobs and Economic Growth Plan, as well as his other polices for controlling spending and reforming government, Newt 2012 hired Fiscal Associates and its lead economist Gary Robbins to score the impact of Gingrich's polices. They were chosen because they have a fully developed economic model with demonstrated ability to estimate the effects of rate cuts in promoting jobs and economic growth.

Their study yielded the following key findings:

1. President Gingrich's pro-growth policies would create 6.6 million new jobs in the first two years;
2. President Gingrich's pro-growth policies combined with sensible spending reductions and increased federal royalties from American energy development would balance the budget in his first term;
3. President Gingrich's structural reforms to entitlements would keep the budget balanced.

President Gingrich Pro Growth Policies Would Create 6.6 Million New Jobs In Two Years

The Fiscal Associates score projects that Gingrich's supply side program would restore the economy to the long term economic growth path of 1947 to 2007, when the economy averaged 3.2% real growth per year, up from the current trend predicted by CBO of 2.4%. That catch up would involve average real growth over the first 10 years under the Gingrich program of 4.4% a year.

That booming economic growth would produce 6.6 million jobs in the first two years alone, reducing the unemployment rate ultimately to 4.6%. The overall results from the Gingrich path would be a 20% higher standard of living for the American people compared to the Obama path, indefinitely into the future.

This findings are consistent with the Reagan expansion resulting from similar policies. The score does not include further economic deterioration under the Obama policies likely to begin next year, stemming from his dramatic tax rate increases already enacted into current law for 2013, not to mention the further tax increases Obama called for in the State of the Union, and in his recent budget. Those policies will cause another steep recession next year.

President Gingrich Would Balance the Budget in his First Term

It was Newt Gingrich's leadership as Speaker of the House of Representatives which led to the last balanced budgets, and the Fiscal Associates score of Newt's policies show he would achieve this goal again. In fact, with the above Jobs and Economic Recovery Plan, President Gingrich would be able to balance the budget within his first term.

The first step to balancing the budget is to restore booming economic growth, which produces both surging revenues and reduced spending, all by itself. In fact, each percentage point of increased GDP growth by itself reduces the deficit by close to $3 trillion over 10 years.

The Gingrich tax reform plan was not designed to be revenue neutral, but to maximize job creation, economic growth and prosperity. The Gingrich plan is not to bring revenues up to the level of federal spending, but to reduce federal spending to the level of revenues produced by a maximum jobs and growth economy.

The Fiscal Associates score projects a net revenue loss on a dynamic basis from the above tax cuts of $140 billion in the first year. But the pathbreaking paper published by Harvard's Martin Feldstein in 1996 in the prestigious American Economic Review projects the present value of the net gain in GDP of shifting to personal savings and investment accounts for Social Security of $20 trillion. Based on that analysis, we estimate that the additional revenues produced by the pro-growth effects from those accounts would be at least $26 billion in the first year.

In addition, the free market energy policy referenced above, unleashing American companies and workers to maximize production of American energy from all sources, would produce at least another $18 trillion in future increased royalties and other pro-growth effects. While that too would grow sharply over time, we estimate at least $15 billion in the first year from those effects alone, reducing the net revenue loss below $100 billion.

That revenue loss would be overwhelmed by a budget policy of returning every federal line item to 2007 levels, except Social Security, Medicare, Medicaid, defense, debt interest, and federal employee retirement benefits. That was just a few years ago, and America survived perfectly fine with those levels of spending. The first year savings from that policy would be almost $500 billion, growing larger in future years due to the lower trend line.

That would just be a down payment on the desirable budget cuts, as federal spending grew by one-seventh as a percent of GDP during the Bush years, and by another one-fourth already in the Obama years, less than half the time for the Bush increase. Further cuts would come from eliminating every corporate welfare program and bailout, and outdated or counterproductive programs such as Fannie Mae and Freddie Mac. Repealing Obamacare would save at least $725 billion in the first 10 years alone.

Additional spending reductions proposed by House Budget Committee Chairman Paul Ryan in his 2012 and 2013 budgets, and by the Simpson-Bowles Commission, would be adopted as necessary to balance the budget. The Fiscal Associates score shows that these budget cuts would easily balance the budget in the first Gingrich term. Indeed, that score shows that the pro-growth effects of the tax reforms alone would balance the federal budget within 10 years. The budget plan that Speaker Gingrich negotiated in the 1990s in fact produced a balanced budget in 3 years.

President Gingrich Would Keep the Budget Balanced

That budget balance would be maintained over the long run by the sweeping entitlement reforms specified in great detail at Newt.org. Those include beginning and expanding an option for personal savings, investment and insurance accounts for Social Security and Medicare, eventually expanded to finance all the benefits financed by the payroll tax today. That would ultimately shift federal spending equal to 10% of GDP to the private sector, where the private savings, investment and insurance would pay better benefits than Social Security even promises today, let alone what it could pay. The transition to the accounts is financed entirely by the reduced spending from the other entitlement reforms, as was accomplished for the personal accounts proposed in the Ryan Roadmap, as scored by CBO.

The transition financing plan also includes extending the enormously successful 1996 AFDC welfare block grant reforms, adopted under Speaker Gingrich's leadership, to all of the nearly 200 federal means tested welfare programs, block granting welfare back to the states. Based on the results of the 1996 reforms, we estimate that would likely reduce federal spending by $4.14 trillion over the first 10 years alone, while the poor would benefit further as they did under the 1996 reforms.

Further transition financing would result from adopting the Medicare reforms proposed by Sen. Ron Wyden (D-Ore) and House Budget Committee Chairman Paul Ryan (R-WI), along with ultimately a personal account option for the Medicare payroll tax that would generate additional resources in retirement to help pay for private insurance in place of Medicare. Each senior would be free to choose among those private alternatives or traditional Medicare if they preferred. That choice would benefit seniors by freeing them to escape the rationing President Obama is imposing on traditional Medicare.

The entitlement reforms would also include repealing and replacing Obamacare with Patient Power, as proposed by the godfather of Health Savings Accounts, John Goodman of the National Center for Policy Analysis. These reforms would reduce federal spending by 50% as a percent of GDP over the long run. That would be the largest reduction in government spending in world history, and a complete solution to America's fiscal and entitlement crisis.

Committee for a Responsible Federal Budget (US Budget Watch)

The policy of the so-called, self-appointed Committee for a Responsible Federal Budget (CRFB) is that no budget is responsible that does not include a tax increase. That is why they never had a positive word to say about the Ryan Roadmap, even though it was officially scored by CBO as permanently balancing the budget over the long run, and achieving full solvency for Social Security and Medicare, with no tax increase.

Because of that history and because they show no comprehension of how to score the impact of economic growth in helping to balance the budget, we provided no information on our tax and budget reforms to the organization. Like Newt has said, "They want to score my Jobs and Economic Recovery Plan without counting the jobs."

The CRFB was started over 20 years ago as an organization dedicated to reversing Reaganomics, by individuals who had lost the debate to Ronald Reagan, and refused to accept his dramatic, historic proven success.

Appendix 1: The Gingrich Jobs and Growth Plan

Tax rate deductions and eliminations:

• An optional 15% flat tax;
• Federal corporate tax rate of 12.5%;
• Zero capital gains tax rate;
• No death tax;
• Immediate expensing for capital investment;

The plan would also slash regulatory costs and barriers, including:

• Repeal of Dodd-Frank;
• Repeal of Sarbanes-Oxley;
• Repeal of Obamacare;
• Repeal CAFE Standards;
• Replace the Environmental Protection Agency with an Environmental Solutions Agency;
• Modernize the Food and Drug Adminstration to enable new medicines to be developed and brought to the sick far more quickly and far less expensively.

More changes:

• Personal savings, investment and insurance accounts eventually expanded to finance all the benefits financed by the payroll tax today, ultimately displacing that tax entirely.
• Reform of the Federal Reserve to mandate that it follow a price rule to maintain a stable dollar without inflation.

Appendix 2: Contrast with Obama's Budget

Note the sharp contrast between our budget reforms, and President Obama's just released 2013 budget plan. Obama's budget includes:

• No tax reform;
• No lower tax rates to promote jobs and long overdue, booming economic recovery;
• No entitlement reform;
• No new net spending cuts;
• No repeal and replacement of Obamacare;
• No net deficit reduction except as projected from tax increases that will actually lose revenue rather than gain revenue (see history of capital gains tax increases). In fact, if President Obama's already enacted tax rate increases for next year, and the new taxes he proposes, cause another recession next year, the result will be less not more federal revenues, and still more deficits and debt.

But the Obama budget does include:

• The fourth consecutive trillion dollar deficit, while the highest deficit previously under any other President was less than half a trillion;
• Further job-killing tax increases, beyond those he has already enacted into law for next year;
• Continued increases in federal spending every year, totaling $3.795 trillion in 2012, an increase of over 27% during his first term alone, up another $193 billion from the last year. President Obama's own budget proposes that spending to continue to soar by 2022 to $5.820 trillion, the highest spending in world history. Over the next 10 years, President Obama proposes federal spending totaling $47 trillion... in his own budget!
• Projected national debt held by the public to total $11.6 trillion for 2012, double the national debt of $5.8 trillion in 2008! Consequently, by Election Day 2012, Obama will have doubled the national debt, in just one term of office. In that one term, he will have added as much to the national debt as all prior Presidents, from George Washington to George Bush, combined!
• By 2022, Obama's own budget projects that national debt held by the public to total nearly $20 trillion! That would be the highest national debt in world history. The gross federal debt, which includes the money the taxpayers owe in the Social Security trust fund and similar federal debts, is projected in Obama's own budget to total nearly $26 trillion by 2022! That is projected to be just over 100% of GDP that year.
• And those projections of federal deficits and debt include all of President Obama's already enacted tax rate increases for next year, and all of the further tax increases he proposes in the budget, with federal income tax revenues projected to double by 2020, federal corporate tax revenues to double by 2017, and federal payroll to double by 2022. But as discussed above, the tax increases will not produce those dramatic revenue increases, meaning even higher deficits and debt. Indeed, if those tax increases result in another recession next year, revenues will go down rather than up.