To hear presidential hopeful Newt Gingrich tell it, he nearly single-handedly balanced the budget in the late 1990s and he now has the “fresh” ideas on budgets and taxes that will pull the nation out of its current financial morass.
The former House Speaker wants to cut the U.S. corporate tax rate to 12 percent, the same as Ireland’s, and allow businesses to write off 100 percent of new equipment in a single year. He would eliminate the capital gains tax to emulate China, cut everyone else’s taxes “dramatically,” and finally achieve ratification of a balanced budget amendment. All of this, he says, would fully revive the economy, put millions of Americans back to work, and drastically shrink the $1.5 trillion budget deficit.
From all indications, the ever-confident Gingrich intends to revive his political career by announcing his candidacy for the 2012 Republican presidential nomination this spring. Gingrich told aides he plans to make the formal announcement in May at Independence Hall in Philadelphia.
The World According to Newt
In interviews with Esquire last summer about his all-but-certain bid to challenge President Obama, the loquacious, professorial Gingrich touted his experience. “What you don’t know is whether or not people care or are worried enough about the country’s future and feel the need for experienced leadership that’s actually participated in things on the scale of welfare reform and balancing the budget — the fact that we had the lowest spending since Calvin Coolidge, even with a liberal Democrat in the White House.” he said.
Gingrich, 67, served as the 58th House Speaker from 1995 to 1999, when he retired amid controversy and spiraling GOP fortunes. Time Magazine once named him Man of the Year for leading the Republican Revolution that ended 40 years of Democratic dominance in the House. While in power, Gingrich pushed through the Republicans’ conservative “Contract with America” reforms, including major changes to the welfare system and passage in the House of a constitutional balanced budget amendment.
But while he touts his balanced budget efforts, Gingrich rarely credits the Democratic President Bill Clinton, who presided over the last budget surpluses, in 1998, 1999, 2000 and 2001. The balanced budget constitutional amendment idea has been around for decades (the first one was proposed in 1936 and would have established a per capita limitation on the federal debt), and it was first made part of the Republican platform in 1980, when Gingrich was a back-bench member of the House. His tax-cutting ideas mirror the “supply side” economic theories that also have a long and storied history.
Gingrich touts his budgetary successes in the 1990s and says he can bring about a balanced budget again if the nation elects him president in 2012. It’s the world according to Newt – but whether he can sell himself again to his party and the country remains to be seen.
“It’s a question of whether the country wants a new face or an old hand,” said Tony Blankley, Gingrich’s former press secretary and now a public relations executive. Blankey hastens to note that he no longer speaks for the former Speaker. “Obviously Newt is not going to run as a new face. He has things to point to and a claim that he did it the last time” the budget was balanced, Blankley said.
The balanced budget constitutional amendment passed the House when Gingrich was in charge in 1995, but failed by one vote to reach the two-thirds majority necessary in the Republican-controlled Senate. Gingrich says he and the House leadership proceeded to “implement” the amendment piecemeal, by passing budget cuts that Clinton and the Democrats opposed. Clinton’s veto of a GOP budget bill led to two government shutdowns, in late 1995 and early 1996. By many accounts, the shutdown was a boon for Clinton, whose popularity in polls shot up and who went on to win re-election against Sen. Bob Dole, R-Kan., the majority leader of the Senate at the time of the government closures.
Gingrich sees the shutdown as an advantage for Republicans and one that the current GOP leadership ignores at their peril. He advises avoiding a shutdown if possible, but if it’s a choice between surrendering their budget-cutting principles and closing the government – let the government close, he says.
“Those who claim that the shutdown was politically disastrous for Republicans ignore the fact that our House seat losses in 1996 were in the single digits. Moreover, it was the first time in 68 years that Republicans were reelected to a House majority – and the first time that had ever happened with a Democrat winning the presidency,” Gingrich wrote in a recent op-ed piece.
And yet, 1996 was the year that Gingrich’s own popularity began to plummet. Because of the loss of seats and ethics investigations that threatened his speakership, Gingrich resigned from the House in November 1998. Since then, he has been speaking and writing, at think tanks and his own institute, along with his third wife, Callista, the former clerk of the House Agriculture Committee.
And now, the budget deficit, which was a mere $164 billion in 1995, has ballooned to nearly $1.5 trillion and mounting.
Bryan Caplan, economics professor at George Mason University, said Gingrich’s zero capital gains and the very low corporate tax rate are ideas that are popular among economists because the current high rates are viewed as double taxation of earnings. Politically, Caplan said, cutting taxes is always a popular idea. But he said a large overall tax cut, like the one Gingrich proposed, won’t necessarily lead to reduced unemployment. “Personally, I’m skeptical about government spending or tax cuts as a way to reduce unemployment. I think monetary policy is much more effective,” he said.
Rudolph Penner, economic expert at the Urban Institute and a long-time Washington budget hand, said Gingrich’s proposals would probably enhance growth somewhat, and as such would help with the budget deficit problem. “However, it is impossible to imagine that the increase in growth following tax policy changes, regardless of how efficient, would be sufficient to solve the whole budget problem.”