The Economic Policies Of Iowa's Winners
Here in the nation’s capital, Iowa seems far away. Not just in distance (1,016 road miles from the White House to Des Moines), but in how voting for Republican presidential candidates was organized.
Are Iowans who caucused Tuesday night representative of the American electorate? Does it matter that Rick Santorum, with 30,007 votes, was essentially tied with the leader in funding and organization, Mitt Romney, with 30,015?
Recall that only three Republican winners of the Iowa caucuses have gone on to win the Republican presidential nomination-Gerald Ford in 1976, Bob Dole in 1996, and George W. Bush in 2000. Ford lost to Jimmy Carter, Dole lost to Bill Clinton, and Bush won against Al Gore, but barely, after a drawn-out Florida recount and a Supreme Court decision.
In Iowa Tuesday night, Romney and Santorum each polled 25 percent of the vote, with Texas Representative Ron Paul coming in third at 21 percent. On Wednesday, Minnesota Representative Michele Bachmann, announced that she was suspending her campaign. Utah’s former governor, Jon Hunstman, who did not campaign in Iowa, polled one percent and remains a candidate, barely.
In appraising the outcome, it is wise to keep in mind that Iowa caucuses are not representative. The people who vote do not mirror the national Republican party as a whole.
Plus, the ballots are open to all, so your neighbor, your friend, or your boss can see how you vote, resulting in potential intimidation and peer pressure.
Santorum was the latest candidate to pose a serious challenge to Romney, for months considered the front runner. Santorum’s star rose in Iowa as Romney campaign attacks on Newt Gingrich knocked back the former House Speaker. He finished fourth with 13 percent.
Santorum’s brand of family-based, free-market conservatism evidently resonated with many Iowa Republicans, especially rural voters.
Let’s examine the economic views of the two Iowa winners, Romney and Santorum, without assuming prematurely that either will be the nominee. And let’s not forget that the Congress, even if both chambers are Republican, will work its will on the proposals of a new Republican president.
Santorum would cut taxes across the board. The top individual rate would decline to 28 percent from 35 percent now. Small businesses owners who currently file as individuals would see their tax rates decline. Santorum would halve the corporate tax from 35 percent now to 17.5 percent, so firms would do better filing as corporations rather than as individuals.
Manufacturers would have a corporate tax rate of zero. Naturally, this would encourage companies of all stripes to describe themselves as manufacturers. Businesses would be allowed to write off in the year of purchase the entire cost of plant and equipment, rather than over several years.
Santorum would end estate taxes and reduce the long-term capital gains tax (for holdings of more than a year) and dividends from 15 percent now to 12 percent. Along with former Gingrich and Perry, Santorum favors creation of optional personal accounts as a way to reform Social Security. Ron Paul has proposed letting people opt out of Social Security entirely.
Romney would not lower taxes to the same extent. He has not promised cuts in personal tax rates, as have Santorum, Perry, Huntsman, and Gingrich. Individuals, and small businesses filing as individuals, would still be subject to a maximum rate of 35 percent. In taking this position, Romney presumably plays to moderate Republicans who worry about deficits.
Romney would, however, lower the top corporate rate to 25 percent (compared with 17.5 percent for Santorum). The ten percentage point difference between top rates for individuals and corporations would encourage some business owners to file as corporations.
Romeny would eliminate capital gains taxes completely for those earning under $200,000 per year, but leave the top rate at 15 percent for others. And he would eliminate the estate tax.
Romney has supported House Budget Committee Chairman Paul Ryan’s December 2011 plan, cosponsored with Oregon Democratic Senator Ron Wyden, to reform Medicare by allowing seniors to choose from a variety of qualifying health plans, including traditional Medicare, rather than being required to sign up for Medicare plan. Ryan-Wyden offer federal help with private plan premiums as an alternative to Medicare.
Santorum goes further, and supports Ryan’s April Medicare reform plan, which would transform Medicare altogether. It would, for those who reach age 65 in 2022, offer a choice of a variety of private health plans, with federal help, the amount depending on health and income, to pay premiums. Other seniors would remain on traditional Medicare.
It is noteworthy that although Medicare is often deemed untouchable by political analysts, the two winners in Iowa proposed to radically alter the plan.
This may prove to be a positive development, because Medicare is the source of the biggest future budget and deficit pressures as the population ages.
In 2011, the federal government’s debt climbed to $15 trillion (the sum of all previous deficits), and for the first time the national debt equalled 100 percent of GDP, a disturbing milestone. So it’s heartening to know that some voters are taking the problem seriously.
Romney’s funding and organization are far superior to those of Santorum, and encourage the expectation that Romney, a former Massachusetts governor, will win next Tuesday’s primary in New Hampshire. But politics is full of surprises, and perhaps Santorum will give Romney a run for his money in South Carolina and beyond.
This piece originally appeared in RealClearMarkets
This piece originally appeared in RealClearMarkets