Clearly, the single most important challenge for the Obama
administration and the new Congress is to revive our ailing
economy. Our arcane tax code, apparently too complex even for two
of the government's most important tax officials -- House Ways and
Means Committee Chairman Charles Rangel and Treasury
Secretary-Designate Timothy Geithner -- should be the primary target
of all that pent-up legislative energy on Capitol Hill. Now's the
ideal time to comprehensively reform our tax system.
Properly done, this reform will accomplish two important goals.
It will (1) spark economic growth by increasing the incentives for
Americans to work, save and invest and (2) remove the needless
complexity in the tax code that drags down our economy, stifles
innovation, and dismays so many of America's entrepreneurs.
How best to accomplish these twin goals? Reduce the top federal
tax rate on individuals and employers by 10 percentage points and
reduce other income tax rates by similar amounts. Economists at the
Heritage Foundation estimate this would create 1 million new jobs
by 2010 and increase gross domestic product by $130 billion.
Struggling employers, especially those competing with overseas
firms, would be overjoyed by this reform. Why? The United States
imposes one of the highest tax burdens on businesses in the
industrial world. In fact, aside from economically moribund Japan,
America's top tax rate (the combined state-federal rate is 40
percent) is the worst among our 30 largest trading partners. Lest
you dismiss the significance of this self-imposed albatross, bear
in mind that in 2007 the total value of U.S. trade with these
nations (exports plus imports) was a cool $2.7 trillion, almost 90
percent of all U.S. trade.
Washington's new ruling elite also must unleash the full might
of America's domestic energy potential. With global energy prices
having come back down to earth, there is no better time for
lawmakers to drive reforms that will pay dividends in the decades
Legislation introduced last Congress by Arizona Rep. John
Shadegg would remove the regulatory obstacles that have stifled
development and production of domestic fossil fuels. Heritage
Foundation economists calculate that, if implemented, Mr. Shadegg's
approach would increase U.S. energy output by up to 2 million
barrels of oil equivalent per day, lead to creation of 270,000 new
jobs (almost all of them well-paying positions in our besieged
manufacturing sector), and boost GDP by $164 billion. Not bad.
Ushering in what some have dubbed a "nuclear renaissance" also
should top the new president's agenda. This means removing the
arduous regulatory impediments to building new nuclear power
plants, opening the Yucca Mountain storage facility for spent
nuclear waste, introducing market reforms to nuclear waste
management, and stopping all energy subsidies.
According to a study by the nonprofit American Council on Global
Nuclear Competitiveness, a nuclear investment plan that consisted
of 52 reactors, a nuclear-fuel recycling plant and four enrichment
plants by 2030 would create 350,000 jobs and provide clean,
inexpensive power to more than 50 million American homes.
Finally, our military must be prepared to meet a more diverse
and uncertain list of threats - terrorism, rogue regimes that
possess the capability to produce weapons of mass destruction,
high-seas piracy, securing American borders, or responding to
natural disasters at home or abroad - than at any time in our
history. As has often been noted, however, our armed services are
First, we need a larger military. At the beginning of the
Clinton administration the Army was nearly twice as big as it is
today. By 1996, the Army's force structure had been slashed from 18
divisions during Operation Desert Storm to only 10 - its size
America's military hardware and platforms, moreover, also need
to be replenished. In the late 1980s, the Navy boasted 566 ships.
Today, it struggles to sustain a fleet of only 283 ships, 30 short
of the 313-ship threshold that the Navy's top brass says will be
required by 2020. Likewise, our fleet of B-52 bombers dates from
the early 1960s. The current plan, due to funding shortfalls, is to
deploy the B-52 until the mid-2030s. Flying the B-52 in combat in
2030 would be as ridiculous as flying the B-17 bomber, built in the
late 1930s, in combat today.
The bottom line is that keeping America safe is the federal
government's first and most legitimate responsibility. Lawmakers
and the new administration must dedicate whatever it takes (the
most reliable estimate is at least $50 billion per year) to address
these unmet national security needs.
This isn't an easy agenda. But then, these aren't easy times.
Let's all hope President Obama and his partners on Capitol Hill are
up to the arduous tasks ahead.
Mike Franc is Vice President for Government
Relations at The Heritage Foundation.
First Appeared in the Washington Times
Clearly, the single most important challenge for the Obama administration and the new Congress is to revive our ailing economy. Our arcane tax code, apparently too complex even for two of the government's most important tax officials - House Ways and Means Committee Chairman Charles Rangel and Treasury Secretary-Designate Timothy Geithner - should be the primary target of all that pent-up legislative energy on Capitol Hill. Now's the ideal time to comprehensively reform our tax system.
Vice President, Government Studies
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