When it comes to Economics, the Republican Party has some very adamant views. They believe that every American deserves the right to own, invest, build, and prosper. They believe that sensible business regulations are incredibly important, and that business regulations should promote confidence in the economy among both consumers and businesses. Republicans oppose any policies that are seen as interventionist, and that give the federal government control of industry. They feel that these policies allow the government to pick the winners and losers of the marketplace, rather than letting economics and business practices speak for themselves.
Republicans believe that inflation is a tax to the American people. It diminishes their purchasing power both at home and abroad. It punishes those who save money, keeps money in the hands of larger businesses rather than smaller ones, and is a major hindrance to seniors and others who live on fixed incomes.
The rest of this article will examine the Republican views on the economy, with their views broken down by each of the following economic issues.
- Small Businesses
- The Federal Reserve
- Budget Reform
- Housing Market Reform
- Infrastructure Programs
- Democrats vs Republicans on the Economy
- The Job Market
- The Global Economy
One of the central tenants of the Republicans’ views on the economy is the importance of small businesses. Republicans believe that small businesses are the backbone of the American economy. They employ tens of millions of people, and make up a vast majority of not only American jobs, but also of patents and U.S. exporters. Therefore, they should be given opportunities to grow and succeed, rather than being stifled by policies that instead benefit large corporations.
The Obama administration has seen the lowest rate of business startups in thirty years. Republicans would see the tax code reformed to allow businesses to grow, and to therefore create jobs across the nation. They would encourage investors to pursue investments in small businesses. They would seek a financial environment that would make financing and credit more accessible to small businesses, allowing them to pursue manufacturing and expansion.
Republicans believe that the Federal Reserve is in great need of an audit. Because the actions of the Federal Reserve impact economic activity and inflation alike, its actions should be transparent. Republicans also believe that the Federal Reserve’s role of a last-resort lender should be more transparent. The party is in strong support of legislation that would bring not only transparency, but also accountability to the Federal Reserve, as well as the Federal Open Market Committee, and the federal government’s dealings with foreign central banks. The most efficient path to this transparency and accountability is an annual audit of the Federal Reserve’s activities. Republicans understand that this audit would need to be carefully constructed so that it kept the Federal Reserve isolated from political pressures, ensuring that its decisions are made on sound economic principles, and are in no way swayed by political pressures or values.
The Republican Party supports a reform of the budget process, and has repeatedly proposed various reforms to accomplish this. Republicans voted for a Balanced Budget Amendment. 33 states have already implemented the reforms outlined in this amendment. The Republican Party also supports a Constitutional amendment requiring a super-majority for any tax increases, with exceptions for national emergencies. They also support the imposition of a cap that would limit spending to the historical average percentage of the Gross Domestic Product. The purpose of this cap would be to prevent Congress from balancing the budget through tax hikes.
Republicans wish to see the tax system greatly simplified. They also wish to see government spending and regulation reduced. They believe that the economy would greatly benefit from American companies being more competitive in the world market, and from Americans being more aggressive in their promotions of American products abroad. They wish to see infrastructure such as roads, bridges, airports, ports, and water systems controlled run by a state-federal-private partnership. Republicans support a major Medicare reform, as Medicare has become a major driving factor in the country’s current debt levels.
Republicans believe that the acceptable role of taxes in an economy is to “fund services that are essential and authorized by the Constitution, such as national security, and the care of those who cannot care for themselves.” All other taxes, such as those that redistribute wealth or fund unnecessary programs, should be done away with, and that money should stay in the pockets of the American people. The Republican Party seeks a tax system that is “simple, transparent, flatter, and fair.” They also would like the reformed tax system to promote economic competition, and to provide more benefits to families with children. Republicans also seek increase the child tax credit, and to get rid of the marriage penalty and the death tax. They also believe in providing deductions on premiums of long-term insurance plans, with additional exemptions for elderly spouses, parents, or relatives that a family tends to in their own residence.
Republicans oppose all types of retroactive taxation, and believe that religious organizations, charities, and fraternal benevolent societies should not be subject to taxation. Donations to these types of organizations should also be tax deductible. Republicans also believe that the implementation of a national sales tax should only be allowed if it coincides with the repeal of the income tax.
Fannie Mae and Freddy Mac’s implicit government guarantees allowed them to avoid market discipline, and to make risky investments. These factors were a direct cause of the housing crisis. Republicans believe that their favored political status allowed them to fill the pockets of their executives and shareholders at the expense of the American people. Because of this, Republicans support the downsizing of both Fannie Mae and Freddie Mac, and that the direct accountability of their officials should be increased.
The Republican Party also believes in downsizing the Federal Housing Administration (FHA). Under the current administration, it has more than tripled in size. It is currently crowding out the private sector, and may soon need a taxpayer bailout. This will only cause consumers to be further hindered by the housing market, which has already cost them too much money. Republicans support the FHA being limited to helping first-time homebuyers and low- and moderate- income borrowers. They do not want to see the FHA helping bail out borrowers and lenders by funding principal write-downs.
“We must establish a mortgage finance system based on competition and free enterprise that is transparent, encourages the private sector to return to housing, and promotes personal responsibility on the part of borrowers.” Republicans believe that policies such as private mortgage insurance, which encourage reliance on private capital, are key to reducing the federal role in the housing industry. This will prevent future taxpayer bailouts of the industry, and prevent another housing market collapse. Reforms to the housing market should include very clear guidelines on lending practices. They also wish to see measures in the housing reform that reflect the needs of Americans who choose to rent rather than own, and that any housing policy should include measures for apartments and multi-family homes.
The infrastructure networks in this country are key to economic growth, competitiveness in the international market, and national security. Traditionally, infrastructure programs are non-partisan. However, the Obama administration has cut funding to many of these programs, while the Davis-Bacon law is increasing the amount of money that will need to be spend on these projects. Obviously, this combination is not conducive to fostering improvement in infrastructure. Republicans seek to replace funding to infrastructure programs. They wish to stop the diversion of highway funds to other purposes, which is currently being seen in multiple states. They also wish to stop programs that increase federal control over transportation systems.
In the most recent budget proposals, Republicans tried to cut $61 billion from the budget. Democrats, however, proposed cuts that amounted to only 1/6 of that. When it comes to economic debates, Republicans often get accused of targeting children, the elderly, and research that will greatly benefit the people with their budget cuts. In turn, Democrats are accused of being addicted to spending, and of being unable to cut the budget, regardless of the need for it.
Republicans believe that the only way to repair the American economy is to cut spending. In its 2012 platform, the Republican Party calculated “in fiscal year 2011, spending reached $3.6 trillion, nearly a quarter of our gross domestic product. Adjusted for inflation, that’s more than three times its peak level in World War II, and almost half of every dollar spent was borrowed money. Three programs-Medicare, Medicaid, and Social Security- account for over 40 percent of total spending.” The platform goes on to point out that this spending issue would only get worse if Obamacare went into effect, as it is an additional $1 trillion in expenses.
Republicans propose to cut spending by taxing every federal expense and running it through a triplicate test. “First, is it within the constitutional scope of the federal government? Second, is it effective and absolutely necessary? And third, is it sufficiently important to justify borrowing, especially foreign borrowing, to fund it?” Programs that meet these criteria will be kept, while those that don’t will be cut.
The Republican Party believes firmly that economic growth is the most effective path to lower unemployment rates. They strive to see a permanently more successful economy, which will lead to more permanent jobs. They believe that recent efforts to grow the job market have only resulted in temporary or artificial jobs. Republicans prefer to pursue free market policies, which they believe will boost employment and create jobs that will stick around. Republicans also believe in overhauling federal training systems, so that those who do get work can receive training that is both more modern and more effective.
A good deal of the reason that the U.S. is not able to adequately compete in a global market is because American businesses face the world’s largest corporate tax rate. This reduces competitiveness worldwide, and encourages the outsourcing of jobs. It also forces U.S. businesses to maintain lower wages, and lessens the creation of jobs. In order to allow greater success in the international market, Republicans propose lowering the corporate tax rate. They would also like to see a permanent research and development tax credit, and a repeal of the corporate alternative minimum tax. They also suggest that the National Commission on Fiscal Responsibility and Reform and the current President’s Export Council switch to a territorial system of corporate taxation. This would allow profits earned and taxed abroad to be repatriated for job-creating investment in America without penalty. Every $1 billion in American exports can create 5,000 jobs here at home, so fostering the international market is crucial to the recovery of our economy.
The downside to the current boom in international trade is that some nations are limiting American access to their markets while simultaneously stealing our designs, patents, brands, know-how, and technology. The current administration has done little to battle this violation. Republicans believe in insisting on full parity in trades with countries such as China, who have been participating in unfair trade practices. They wish to impose countervailing duties if these countries will not change their policies regarding American trade. They also seek to restore the presidential Trade Promotion Authority. This calls for votes in Congress on ant new trade agreement, without the interference of outside interests. They also seek the completion of negotiations for a Trans-Pacific Partnership, which would open new and rapidly growing Asian markets to the United States. The 2012 Republican Party Platform states that, “we envision a worldwide multilateral agreement among nations committed to the principles of open markets.”
One economic policy that is widely associated with the Republican Party is that of President Ronald Reagan, also known as Reaganomics. This term was used by supporters of the policy and those who opposed it alike. Reagans policy included calling for widespread tax cuts, decreased social spending, increased military spending, and the deregulation of domestic markets. It is largely based on the principles of supply-side economics and trickle-down economics. These theories propose that cutting taxes, particularly for larger corporations, will stimulate the growth of the economy as a whole. If corporations save money, these savings will “trickle down” the economic ladder, spur economic growth, and benefit all Americans in the end.
- Republican Party on Budget & Economy – On The Issues
- Restoring The American Dream: Economy & Jobs – The GOP
- Reaganomics – Investopedia
- Republican Views on the Federal Budget
- Democratic Views on The Economy
- Fix the Economy: A Cause Republicans Can Stand Together On
- Republican Views on Spending
- Republican Views on Jobs
- Democratic Views on the Federal Budget
- Democratic Views on Small Business
- Republican Views on the Minimum Wage
- Democratic Views on Jobs
- Republican Views on Taxes