The GOP's 2012 election strategy: Wreck the economy

It is time to dispel a few myths. First, we are not overtaxed but under-taxed. Federal personal and corporate tax receipts expressed as a percentage of gross domestic product are at 14.1 percent, the lowest rate since 1951.

The Bush tax cuts have been in effect for a decade, but they have not stimulated the economy. Interest rates at the Federal Reserve are effectively zero, but corporations are not borrowing for expansion. The top income tax rate of 35 percent is lower than what we experienced under Ronald Reagan, George H. W. Bush, Richard Nixon andDwight D. Eisenhower.


Yet both corporations and individuals are sitting on their cash. In the words of FDR, the only thing we have to fear is fear itself.

Tax income and annual deficits are inversely proportional. The lower the taxes the higher the deficits. High deficits and the prospect of national bankruptcy frighten corporate planners and individuals alike.


Federal spending is small compared to total GDP. So deficit spending does not have much stimulating effect. However, cuts in federal spending mean cuts in federal and state jobs. An unemployed government worker is just another person on the unemployment rolls, a non-producing drain on the economy.

Higher deficits and lower confidence form a vicious spiral. Economic activity is suppressed, which lowers tax revenues. But a balanced budget and secure government programs create a virtuous cycle. Consumers will have confidence to spend more and business to invest more.

How do we improve the situation? First raise the debt limit. Playing chicken with the debt limit is like playing chicken on the highway. The rewards are small and momentary: the danger is extreme and permanent.

Next, eliminate the Bush tax cuts and the Obama tax cuts. Establish an alternative minimum tax for corporations, so that Exxon and GE pay at least some taxes.

Meanwhile, withdraw most of our overseas military deployments and cut military aid to other countries. Those are expenditures that do not feed back into the domestic economy. They are almost pure waste.

Institute a voluntary Medicare program for people 55 and over, funded by monthly premiums but using the more efficient Medicare payment system, a step toward a mostly single-provider system like Germany has.

Republicans really want a double dip recession so that they can take over the government. That is why they refuse to put taxes back to a reasonable level, refuse to regulate the excesses of the oil speculators that have driven up gas prices, etc.

But if they succeed they will find that they have won a political prize not worth winning. Already they are having trouble finding candidates who understand the basics of our history and Constitution. Who wants to follow a failed Obama administration?


If they destroy the economy to defeat the president, they will inherit a worse mess in 2013 than President Obama faced in 2009, and with no tools to correct the situation. They will have broken all of the tools needed for recovery in order to defeat the president.

John Culleton, Eldersburg