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Kemp: Honoring Lincoln

By Jack Kemp

February 3, 2009 for Townhall.com

No matter where we are on Feb. 12, every American from sea to shining sea will celebrate the 200th birthday of our greatest president — Abraham Lincoln. Song, speech, pageant and ceremony will mark the occasion.

The nation’s capital, where Lincoln helped preserve the Union, will offer numerous opportunities to celebrate. The Abraham Lincoln Bicentennial Commission hosts the national ceremony at the Lincoln Memorial, a birthday breakfast, and a Webcast teach-in available to students around the world.

Congress pays tribute in the Capitol Rotunda, and the Library of Congress opens its national exhibit.

Exhibits at several Smithsonian museums offer glimpses into the 16th president’s life with photos, documents and artifacts. In celebrating Lincoln and his legacy of freedom, democracy and equality of opportunity, we celebrate the true meaning of America.

Few leaders in history have captured the hearts and minds of so many people in so many nations as Abraham Lincoln. He is so universally revered that he sometimes seems as much a president for the world as for our own country. From Springfield, Ill., to Warsaw, Poland, from Red Square to Tiananmen Square, Lincoln is an inspiration.

There is a very logical global extension of Lincoln’s view of the “American idea” — that the principles enunciated in America’s Declaration of Independence are universal, and that freedom is not just for some people, but for all people, and not just for one time, but for all time.

These ideals were the driving force behind Lincoln’s life and his political career. The Declaration of Independence was so central to his politics, and so close to his heart, that in the bleak winter of 1861, on his journey from Springfield to the inauguration in Washington, he felt he had to stop at Independence Hall in Philadelphia.

He knew the American experiment in democracy and freedom was in grave peril, as was his own life. And in the very building where the declaration was signed, Lincoln spoke of that “something in that Declaration giving liberty, not alone to the people of this country, but hope to the world for all future time. It was that which gave promise that in due time the weights should be lifted from the shoulders of all men, and that all should have an equal chance.”

And then Lincoln added the words that prophesied his destiny, and that of our nation: “If this country cannot be saved without giving up that principle, I was about to say that I would rather be assassinated on this spot than to surrender it.”

Lincoln risked both his career and his life to save the Union and defend the inalienable rights to life, liberty and the pursuit of happiness for all people.

Were he with us today, Lincoln would remind us that the global surge toward freedom really began in the Revolution of 1776, the revolution whose promise won’t be fulfilled until all nations embrace the inalienable rights Thomas Jefferson inscribed in our declaration.

Lincoln was not the first to link the success of American democracy to the hopes of all mankind. From our republic’s earliest days, George Washington, Alexander Hamilton, Thomas Jefferson, Benjamin Franklin and other great statesmen believed that the American experiment in human freedom and democracy was without precedent — and would, if successful, be a precedent for others.

It is interesting to speculate how different our nation might be today had Lincoln been given the chance to guide America through Reconstruction. It is as true now as it was then that so much depends on having the right leadership with the right motives and at the right time in history. Tragically, from the Emancipation Proclamation until this day, the dream of equality of opportunity and freedom for all has yet to be completely achieved.

But Lincoln showed us the way. He believed that the American system of upward mobility was the bedrock of our democracy, that no individual is excluded from the American Dream and that poverty is not a permanent condition. And, like the story of the “Good Shepherd” from Hebrew and Christian scripture, he believed we must move forward, but not leave anyone behind.

Lincoln drew on this classical liberal view of human nature when he introduced the Homestead Act of 1862, which transferred over a million acres of public lands in the West to the immigrant-poor and became the most successful anti-poverty program in American history.

Within a year, nearly 100,000 homesteaders and immigrants eagerly seized the opportunity to own their own land. They built homes and farms on 1.5 million acres, forging better lives for themselves, their families and indeed their country.

His support for the Morrill Land-Grant College Act of 1862 revolutionized higher education in America and was a blessing to millions of future students — and to the nation that benefited from their cultivated creativity and genius.

For Abraham Lincoln, true welfare meant not dependency, but well-being; not equality of reward, but equality of opportunity; not reliance on the state, but reliance on oneself and one’s family. He wrote, prophetically, “The progress by which the poor, honest, industrious and resolute man raises himself, that he may work on this own account and hire somebody else … is the great principle for which this government was really formed.”

Professor Gabor Boritt, in his great book “Lincoln and the Economics of the American Dream,” cited the rest of Lincoln’s argument:

“I don’t believe in a law to prevent a man from getting rich; it would do more harm than good. … I want every man to have the chance — and I believe a black man is entitled to it — in which he can better his condition — when he may look forward and hope to be a hired laborer this year and the next, work for himself afterward, and finally to hire men to work for him! That is the true system.”

In the most “radical” speech Abraham Lincoln ever gave, he compared America to a house divided against itself, half-slave and half-free. I would submit that today America is once again in danger of being divided — this time, however, into two economies, one rich, the other poor; one affluent, the other in abject poverty; one a springboard to opportunity, the other a trap of despair and dependency.

Lincoln understood that it is impossible to support equality of economic opportunity without also upholding equal civil, human and voting rights for all.

Until the Civil War, the threat to American democracy had come primarily from foreign powers, but Lincoln faced America’s supreme crisis: The nation that embodied mankind’s last, best hope seemed hopelessly divided. He believed that “as a nation of free men, we must live through all time, or die by suicide.”

Slavery was the first great test challenging the American democracy’s central principle of equality. Lincoln’s moral indignation over slavery was unbounded. In his 1854 Peoria speech replying to the little giant, Sen. Douglas, he said:

“I hate … the monstrous injustice of slavery itself. I hate it because it deprives our republican example of its just influence in the world — enables the enemies of free institutions, with plausibility, to taunt us as hypocrites — causes the real friends of freedom to doubt our sincerity, and especially because it forces so many really good men amongst ourselves into an open war with the very fundamental principles of civil liberty — criticizing the Declaration of Independence and insisting that there is no right principle of action but self-interest.”

To Lincoln, slavery was an abomination, a hideous stain defiling the nation’s soul; it could only be cleansed by a baptism of fire in civil war.

Since the day Lincoln was taken from us by the assassin’s cowardly hand, American democracy has met great challenges again and again: the injustice of segregation, the evil of “Jim Crow” laws, the despair and economic contraction of the Great Depression, the crises of two world wars, the shameful unconstitutional denial of voting rights, among others.

Our democracy is being tested today not only by our war against terrorism here and abroad, but also by levels of poverty, homelessness and despair unacceptable to a compassionate and affluent nation here at home. As the world’s leading example of democratic capitalism, we must make it work better at home so that all our people are empowered and fully enjoy true equality of opportunity.

On the eve of the bicentennial celebration of Abraham Lincoln’s birth, and 145 years after his Gettysburg speech, Lincoln’s belief that all human beings are created equal and endowed with inalienable rights — the faith upon which liberal democracy is based — is still the last, best hope of people around the world.

Because of democracy’s long march from Independence Hall through Gettysburg to the streets of foreign lands, the world increasingly knows this simple yet profound truth: The yearning for freedom cannot be extinguished, the struggle for inalienable rights will never end, and nothing can deny the transcendence of liberal democratic values.

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Kemp: Fighting a new war on poverty

By Jack Kemp

May 25, 2007 for Townhall.com

To ignore the potential contribution of private enterprise is to fight the war on poverty with a single platoon, while great armies are left to stand aside. – Sen. Robert F. Kennedy

Mario Cuomo of New York electrified the 1984 Democratic Convention with his tale of America as two cities, one rich and one poor, almost permanently divided into two classes. Today John Edwards is running for president on this same platform and using the same metaphor.

But America is not divided into two cities; instead, America is divided into two separate and unequal economies, one that works well and one that is fatally flawed and must be fixed so as to combat poverty.

Our mainstream economy is entrepreneurially capitalistic: It is market-oriented and based on private property, ownership, the rule of law and with widespread access to capital and seed corn for new business ventures. It rewards work, savings, investment and productivity. This economy dominates the American market and serves as an example to the world of democratic capitalism.

The second economy functions in almost direct opposition to our mainstream capitalist economy. Similar to a Third World socialist economy, it denies people an entry into the mainstream due to the barriers to economic activities along with a virtual absence of any link between human effort and reward. It perpetuates poverty, dependency and welfare while discouraging employment, and it prevents access to capital, ownership of assets and quality education. The irony is that this second economy was created out of a desire to help the poor, alleviate suffering and provide a social safety net. However, instead of independence, this welfare-based economy has led to near perpetual dependency, and the social and economic costs to our nation are enormous in terms of unfulfilled potential and dashed dreams. As secretary of Housing and Urban Development from 1988 to 1993, I visited pockets of poverty in ghettos and barrios throughout America. I spoke personally with people living in the depths of poverty and hopelessness. I vowed then to take part in a bipartisan effort to help create an urban American Renaissance. I applaud Edwards’ attempts to raise the issue of poverty and challenge the Republican candidates to join in the debate.

The problem is that self-improvement and ownership of assets are discouraged by regulatory and tax policies that trap people in impoverished areas. In too many cases, the poverty that exists today is due in part to government welfare coupled with regulatory and tax policies that punish work, savings and investment and discourage ownership of assets. The system redlines certain areas of our country, limiting people’s access to capital, credit, mortgage loans and well-paying jobs.

To wage a real war on poverty, we should launch a 21st century Marshall Aid Plan in the cities of America to reform education; create job opportunities; and provide access to capital, credit and ownership opportunities for low-income Americans. This plan must be based on equal opportunities to get jobs, own homes and launch businesses.

The first step is to create Enterprise or Empowerment Zones that would eliminate the capital gains tax in the newly “green-lined” zones, allow for expensing of all investment in plant machinery and technology, and eliminate payroll taxes for men and women who are first-time job holders up to 200 percent of the poverty line.

Next we need to cut the bureaucratic red tape that makes development in urban areas. We need to look at the legal barriers to production and commerce. Local impact (development) fees, application processing costs, building codes, zoning and land use restrictions, and nongrowth policies greatly increase construction costs. Instead of creating regulations that make it more difficult to build in urban areas, entrepreneurs need to be offered incentives for investing in cities.

We must develop a tax reform system that rewards labor, savings and capital formation. A sure way to harm the economy and slow growth is through a capital gains tax, which is not a tax on the rich but rather on the poor who hope to improve their situations. You can’t get rich on wages. The only way to create wealth is to work, save, invest, make a profit and reinvest.

Finally, we need to provide homeownership opportunities and affordable housing to the most impoverished in society who often become trapped in public housing. Through public-private partnerships with organizations such as the Federal Housing Administration, Fannie Mae and the Federal Home Loan Bank, we need to dedicate a percentage of profits to help develop work-force and affordable housing while encouraging homeownership policies to get people on the path out of poverty.

Through eliminating America’s second economy and tapping into the economic forces of a more democratic system of capitalism, we can develop a formula for ending chronic poverty in America. Everyone should have the opportunity to go as high as their merit, ability, determination and quality of their performance can carry them.

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Kemp: Guns, butter and tax code reform

One of this nation’s premier journalists (also a friend of long standing) wrote a column last week that can only be labeled as “Bush bashing” writ large. E.J. Dionne Jr. writing in the Washington Post and Investor’s Business Daily, wrote the following: “winning the war in Iraq was never the Bush administration’s highest priority, saving its tax cuts was more important.” Ugh! E.J., E.J., what’s gotten into you, don’t you read my columns, haven’t you listened to my speeches for the past three decades or so? (People say I talk too much, but how else will they learn!)

One more time Mr. Dionne, and “fellow travelers,” Paul Krugman, Bob Rubin and everyone else who makes the claim that Bush cut taxes in the face of a “war.” Everyone please “read these words carefully,” Bush didn’t cut taxes, he cut tax rates!

Revenues didn’t go down, they went up.

The “rich” didn’t get “tax relief” at lower rates on income and investments, they are paying more in revenue to the federal (and state) government than ever before in history.

The top 1 percent of people in America pays more than 35 percent of all taxes, even at lower rates on capital gains and dividends. By the way, the proper tax rate on capital gains and dividends would be zero, because the tax on corporate income has already been taken out and you shouldn’t tax the same income source more than once. All income should be taxed, but once, not four, five and six times as we do today.

The tax on labor, i.e. primarily payroll taxes, are equally onerous, they should be cut as well, with 6 or 7 percentage points to be allowed to be put into an IRA. This would give workers a much higher rate of return and they would own it.

Back to Iraq and taxes, I actually agreed with Mr. Dionne, who wrote that “it’s absurd that the most powerful country in the world finds itself forced to treat our armed forces so shabbily.” Right on E.J.! You’re exactly right. His conclusion, however, is wrong, the U.S. is “not willing to pay for a large enough military, so now we are paying for their deficit in logic and courage.” E.J. reasons we need to raise taxes on dividends and upper incomes to pay for more troops.

Well, I favor more troops and better armaments, but raising taxes – raising tax rates on incomes more than $250,000 to 300,000 as has been suggested by “the left” – will not raise revenues. It will chase those upper-income taxpayers into tax shelters, or offshore, or both. One more point about “the rich,” the top 1 percent earn 15 percent of total income and pay 35 percent of income taxes. Compared to 10 years ago “the rich” are paying actually a larger share, not a smaller share of income taxes. As I’ve said many times, if you want to “soak the rich” lower the tax rates to 20 or 25 percent where there is absolutely no incentive to go offshore, go into tax shelters or stop producing income by going on longer holidays.

The president wants to achieve a stable Iraq, as all or most of us do, and that will take more boots on the ground to help pacify Baghdad. But slowing down the economy is just plain counterproductive, counterintuitive and counter to historical evidence. President Kennedy cut tax rates during the Vietnam War and the budget came into balance in 1965. Ronald Reagan cut tax rates during the Cold War and unemployment came down, (as did inflation) while the economy more than doubled in the ’80s.

Richard Nixon raised taxes during the Vietnam War, (spreading the sacrifice, E.J. would say) and a recession followed and revenues fell. President Carter raised taxes in the late ’70s and revenues went down, not up.

The Bush tax rate reductions have had a positive impact on the U.S. economy by lowering unemployment to 4.6 percent. Since the second half of 2003, the U.S. economy has grown by around 4 percent on an annual basis, added more than 6 million new jobs and added revenues to the federal treasury of over 15 percent per year for three straight years. Why would E.J. Dionne and others want to jeopardize economic growth?

Even though “the left” is enamored by former Treasury Secretary Robert Rubin’s advice to raise taxes to lower the deficit, the real answer to this challenge of funding the war, expanding our military and reducing the burden of debt is to reform and simplify the tax code while lowering the tax rate on both labor and capital while cutting rate of growth in government spending.

John F. Kennedy said in 1961, “the purpose of cutting tax rates is to achieve a more prosperous, expanding economy … and the soundest way to raise revenues in the long run is to cut the tax rates now.” He did, and those who ignore the empirical evidence of the last 60 years are threatening the growth of our economy and putting the poor in harms way.

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Kemp: Immigration reform will help keep this nation strong

By Jack Kemp

July 17, 2006 for Townhall.com

Last week I warned the Republican Party that failure to pass the Voting Rights Act extension would further alienate African-American voters. Thankfully, the VRA passed. My warning now is this: Failure to address the legitimate issue of immigration reform could also do great harm to the Republican Party. At this critical moment in the immigration debate, Republicans need to examine the role they are playing in this great national issue.

In many respects, the way Republicans position themselves on immigration will determine whether the party retains the mantle of majority leadership. Will we remain a party that governs – that offers practical solutions to the problems facing the country? Or will we revert to the harsh rhetoric of criminalizing illegals and even those who provide services, albeit unwittingly? Immigration – including the robust annual flow required to keep our economy growing and the 12 million illegal immigrants already in the country — is a fact of life in the United States today. And the only practical way to deal with these stubborn realities is with a comprehensive solution, one that includes border security, interior enforcement, a guest-worker program and status for the illegal immigrants already here.

Some counsel that Congress should start with tougher enforcement and border security but wait to create a guest-worker program or address the illegal population. Only in that way, it is said, can we avoid the mistakes of the failed 1986 immigration reform.

In fact, the lesson of 1986 is that only a comprehensive solution will fix our broken immigration system. The 1986 legislation combined amnesty for 3 million illegal immigrants with a promise of tougher enforcement, particularly in the workplace. But the law did not recognize the need for future immigration to meet the demands of a growing economy, and the new enforcement never materialized. Twenty years later, illegal immigration is unabated. While immigrants continue to be drawn to the jobs created by our economy, they have no legal way to enter the country.

As a native son of Southern California, my past knowledge with guest-worker programs bears this out. Illegal immigration reached a peak in the mid-’50s, and more than a million people were apprehended trying to cross the border in 1954. Then Congress expanded the Bracero work-visa program, creating a way for 300,000 immigrants to enter the United States legally each year.

This new legal flow replaced the old illegal influx, and by 1964, Immigrantion and Naturalization Service apprehensions had dropped to fewer than 100,000. As the Congressional Research Service noted in 1980, “Without question, the Bracero program was … instrumental in ending the illegal alien problem of the mid-1940s and 1950s.” The Bracero program and the 1986 failure point in the same direction: A comprehensive solution is the only real and lasting way to address immigration. The American people understand this, which is why in poll after poll they choose a comprehensive approach over one that relies on enforcement alone. A recent NBC/Wall Street Journal poll found that Americans prefer a comprehensive plan to an enforcement-only proposal by 50 percent to 33 percent.

Of course, there are things in the Senate bill that need fixing – and we must stand strong in favor of assimilation. New immigrants need to learn English, U.S. history and the historic principles that have made this country great.

President Reagan, who was in favor of strong borders, once remarked that “a nation without borders is not really a nation,” but he constantly reminded us that America must remain a “beacon” and a “shining city on a hill” for immigrants who continually renew our great country with their energy and add to the nation’s economic growth and prosperity.

Americans and immigrants share the same values of work, family and opportunity. There is no reason to fear the newcomers arriving on our shores today. If anything, they will energize what is best about our country.

The only way to realize America’s vision is through comprehensive immigration reform legislation. I urge the House and Senate to work out their differences and help make our nation one of respect for the law as well as a nation of immigrants and to meet the demand of the American people that we act on this critical issue in a comprehensive and compassionate way.

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Kemp: Deconstructing Rubinomics

By Jack Kemp

January 5, 2004 for Townhall.com

Just in time for the presidential campaign, former Clinton Treasury Secretary Robert Rubin has published a new book, “In an Uncertain World,” in which he contends that the Clinton tax increase on middle-income Americans was “tiny.” Rubin writes that he encouraged the tax hike because he thought it would “give us credibility in the markets.” Here we have the essence of “Rubinonomics,” a kind of New-Age social science premised more on feel-good psychology and business/consumer confidence than economic fundamentals.

On the presidential campaign trail, Democrats, and particularly front-runner Howard Dean, are embracing Rubinonomics, blaming the Bush tax cuts for the escalating deficit projections and proposing tax hikes. Dean, for example, has put forward a tax plan that would reinstate the marriage penalty, resurrect the death tax and increase taxes on a typical middle-class family of four by almost $2,500 a year, according to Steve Moore of the Club for Growth. Moreover, the governor has the audacity to call himself pro-business while pushing for raising the tax rates on capital gains and dividends, increasing the cost of capital, which is decidedly anti-business.

The fact is, with the economy growing at rates not seen in 20 years, governments at all levels will soon see a substantial rise in tax revenues. The real cause of short-term deficits is a witch’s brew of recession and out-of-control federal spending. The real cause of the long-term fiscal imbalance is not insufficient revenues but ill-conceived tax-and-transfer entitlement programs that will collapse of their own weight unless they are reformed to allow workers to invest while they are young to build up annuities to pay for their retirement needs.

“Rubinomics,” ironically, has its roots in the old conservative canard that government borrowing crowds out private investment. The so-called “crowding-out” hypothesis holds that when the government borrows money to finance spending it competes with private companies that are also seeking to borrow money, thus increasing demand for credit and causing interest rates to rise. Higher interest rates increase the cost of doing business and therefore reduce economic growth. If the government raises taxes to reduce deficits or run surpluses, then, the conjecture holds, interest rates will decline, the cost of business will fall and economic growth will rise.

The problem with Rubinomics is that the empirical evidence contradicts its predictions. Both sound economic theory and the historical record demonstrate that it is government consumption of private resources – i.e., government spending whether tax-financed or debt-financed – that crowds out private investment and retards economic growth.

Using the 1990s as a case study, we find that just the opposite happened from what Rubinomics predicts: Interest rates actually began to rise as the deficit declined, and as the economy began to grow in the late 1990s and deficits turned to surpluses, interest rates continued upward. Then, after the economy stagnated in the latter half of 2000 continuing through mid-2003 and surpluses turned to deficits, interest rates sank to historically low levels.

A recent Congressional Budget Office report illustrates the real dynamics behind deficits. Under current tax law, revenues will continue to grow and provide adequate revenues to finance a government growing at the same pace as the economy. It’s when politicians use good economic times to enlarge government at the private sector’s expense that revenues appear to “lag.” This is precisely what the Democratic candidates intend to do by repealing the Bush tax cuts.

If the administration’s tax rate reductions are allowed to expire, by 2050 the combined effect of economic growth and a progressive tax system will increase revenues to approximately 25 percent of GDP, the highest level of taxation in American history – including World War II – and fully one-third higher than the historical average. On the other hand, if the president’s tax cuts are made permanent, federal tax receipts would level off around their historic average of 18.4 percent of GDP. Clearly, the “structural deficits” complained about in the press and among left-wing economists stem from too much spending, not insufficient tax revenue.

Recent press reports on the president’s budget proposals for fiscal year 2005 suggest he is on the right track by reining in discretionary spending. I hope President Bush will campaign on the proposition that government spending should not grow faster than the economy and that he will pledge to veto any legislation inconsistent with this goal.

But to successfully ward off tax-and-spend liberals, as well as tax-happy Republican deficit hawks, Bush must provide bold leadership on entitlement reform. As my supply-side guru Irving Kristol always used to say, the best way to reduce the growth of government is by enacting policies that allow the economy to grow faster and enabling people to build wealth.

To that end, I hope the president will announce in his State of the Union address a reform agenda including Social Security reform premised upon large personal retirement accounts available to all taxpayers with a guaranteed minimum benefit equal to that promised under the current system. That way, he can exorcise the New-Age mythology of Rubinomics and get us back to fundamentals.

 

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Kemp: Thanks, hope and optimism

By Jack Kemp

December 22, 2003 for Townhall.com

The year 2003 will be remembered as a year of war and conflict, and it will be measured as a turning point in the war on terrorism. The year began with a great debate about whether to go to war in Iraq and culminated with the capture of Saddam Hussein cowering like a rat in the corner of an 8-foot hole in the ground. Between those two bookends much has happened, and as the year comes to a close, we continue to fight remnants of the Baathist regime, the fedayeen and other international jihadists trying to use Iraq and our friendship with Israel as the tinder to ignite a new worldwide conflagration.

Afghanistan continues its struggle to stabilize after U.S. military surgery cut out the Taliban cancer. But it is still too soon to know whether the cancer was fully excised or whether the patient remains in only temporary remission. Meanwhile, we remain in a standoff with Iran and North Korea over development of nuclear programs and proliferation of weapons of mass destruction. And the threat of terrorism continues to percolate with bombings in the Saudi kingdom, in the streets of Turkey and with those Iraqis associated with the coalition. Despite all of the uncertainty and challenging problems, there is still much to be thankful for here at the dawn of the 21st century.

As Americans, during this holy season of Christmas and Hanukkah thanksgiving begins with our young men and women at arms who voluntarily, when called upon by their commander in chief to fight, made the sacrifice, and some the ultimate sacrifice of life itself, to defend the free world against a regime believed to be a threat to world peace. Our thanks continue for those soldiers who remain steadfast in a low-intensity war zone now that major hostilities are over. They persist against enormous odds attempting to help people of another land achieve the kind of freedom that we Americans too often take for granted – our God-given right to life, liberty, property and the pursuit of happiness.

This is also the time of year to remember loved ones lost. In just the last few weeks, America lost two towering figures on the American political stage, and I lost two close personal friends – Robert Bartley and Sen. Bill Roth – both of whom played critical roles in the Reagan Revolution. From the editorial pages of The Wall Street Journal, Bartley led a one-man army with little more than a pen with a singular yet profound mission: “free men, free markets.”

Similarly, Roth, a champion for the taxpayer and a guardian against government waste, fraud and abuse, played a critical role in passing the Roth/Kemp/Reagan tax rate reductions in 1981. Roth also succeeded in enacting his signature legislation, the Roth Individual Retirement Accounts, and guaranteeing an enduring legacy among tax reformers. It is not an exaggeration to say that there would not have been a Reagan Revolution without two field generals named Roth and Bartley.

This year’s end also gives us time for introspection, to put things into perspective and to plan for things to come. Gazing backward, I find great reason for optimism. Looking at the global condition during the last 100, 50 or even 30 years, there is much reason for hope and optimism. In 1900 the average life expectancy was only 30 years; today it’s 67. Global poverty rates have declined more in the last 50 years than in the previous 500 years combined. The global economic pie has expanded from $4.98 trillion in 1950 to more than $33 trillion dollars by 2001. And, according to Freedom House, the number of free countries has doubled from only 43 in 1973 to 89 countries today. Furthermore, the report states, “The evidence of the ebb and flow of democracy during this 30-year period indicates dramatic changes in the global political landscape in the expansion of freedom.” And, according to journalist Gregg Easterbrook, the air, water and landscape is cleaner and greener than ever.

Staring forward into the future, I believe freedom and democracy ultimately will encompass the world, or at least be taking solid root, hopefully by the end of this decade. That is not to suggest that there will not be troubles along the way. Our future is not preordained, which is why men and women of good will must act on their beliefs and why we must remain ever vigilant in the pursuit of our ideals of liberal democracy uber alles. And it is also why we must be willing to live and trade freely with all the risks and dangers that entails.

The most urgent issues currently facing the global community are international terrorism, which destroys the spirit; protectionism, which stunts trade and destroys opportunity; and unnecessary, man-made abject poverty, which persists in far too many nations. As Secretary of State Colin Powell, for whose rapid recovery from surgery we all are praying, stated many times, “Lifting humanity out of poverty is one of the greatest moral challenges of the 21st century.” By continuing to champion global democracy, peace and prosperity, we can further freedom for all and bring hope to those who presently have none.

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Kemp: Five easy pieces of tax reform

By Jack Kemp

December 7, 2002 for Townhall.com

I wasn’t going to write about taxes for a second week in a row, but then I read Treasury Secretary Paul O’Neill’s interview with the Financial Times, which troubled me in light of several other recent signals indicating that the Treasury may be heading in what I consider to be the wrong direction on tax reform.

It was good to hear O’Neill say that the Treasury is in the process of “cataloging all the ideas that have been advanced over the last 10 or 20 years about how one might restructure the (tax) system.” The bad news is it appears the Treasury may prematurely have whittled down the ideas it will submit to the president from the catalog. The Financial Times quoted the Treasury secretary saying the reforms that were most likely were the ones that were “minimally controversial and not very costly.”

This comment sounds harmless enough, if somewhat timid, but it is worrisome when considered in the context of a Wall Street Journal report several weeks ago by Alan Murray in which there were hints that Treasury bureaucrats may be predisposed to “reform” the tax system with a scheme similar to the one proposed by Yale University law professor Michael Graetz. Graetz’s proposal would add a 15 percent value added tax on top of the current income tax, making it not only “not very costly” in O’Neill’s terms but almost certainly also capable of generating vast new revenues to fuel the growth of government. The incidence of a VAT is so stealthy that few taxpayers would perceive or understand who is actually paying the tax.

Rather than addressing the fundamental flaws that plague our existing tax system, the Graetz plan would simply eliminate the income tax altogether for families earning less than $100,000, almost 90 percent of all current filers. This trick would minimize controversy among voters by the same old political stratagem of shifting an ever larger share of the income tax onto an ever smaller share of taxpayers. Taxpayers earning more than $100,000 a year would be forced to pay the hated alternative minimum tax with a 25 percent rate. Such “simplicity,” however, would come at the expense of imposing even heavier penalties on the chosen few who now would pay both a VAT and an unreformed income tax.

Ernest S. Christian and Gary Robbins, two former Treasury Department officials, offer a very attractive alternative, which they call the “five-easy-pieces” approach to tax reform. None of the components is strange or exotic, and the president doesn’t need to pore through a catalog of past recommendations; he already endorsed the five easy pieces right after the Waco economic summit last summer.

Christian and Robbins suggest a method of maintaining the American tradition of taxing income while lowering the exorbitantly high marginal tax rates that discourage work, penalize personal saving and depress business capital investment, which substantially depress productivity and wage gains. Their approach also would eliminate the perverse aspects of the current tax code that greatly disadvantage American manufacturers and exporters. Consequently, the five-easy-pieces approach would also eliminate tax incentives for U.S. companies to move offshore.

The five incremental amendments to the current tax code that would begin the reformation process and simultaneously give the economy an immediate boost are: (a) lowering marginal rates (including capital gains tax rates); (b) eliminating the double tax on corporate earnings; (c) accelerating depreciation, ultimately to the point of 100 percent first-year expensing for business capital investment; (d) expanding the Roth IRA to all personal saving; and (e) excluding export and other foreign trade income of American companies from tax in much the same way that other countries already do in the world marketplace.

Some of the five easy pieces would probably have to be gradually phased in. However, in order to bring the benefits of fundamental tax reform immediately to economically distressed areas and territories – especially those areas and territories adversely affected by free-trade agreements – I would add a sixth easy piece to the mix: nationwide enterprise zones of choice that would give people at the bottom of the economic ladder and many state and local public officials a stake in tax reforms.

Let’s allow each state and territory to designate, consistent with specific federal guidelines, enterprise zones of choice within their jurisdictions in which individuals and businesses living and located within the zones would have the choice of being taxed under the current tax code or under the tax code as it would eventually exist with the five fundamental reforms fully phased in and fully implemented. It would be relatively inexpensive, and not only would enterprise zones of choice give economically troubled areas a jump start economically, they would also provide nationwide laboratories of controlled experimentation – a proving ground – for fundamental tax reform.

Five easy pieces of tax reform, nationwide enterprise zones of choice, a president with a mandate and two whole years before the next election. Sounds like the makings of a powerful bipartisan package that will be good for America.

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