What’s at Stake in Iowa? The Economy, Stupid!
Policy + Politics

What’s at Stake in Iowa? The Economy, Stupid!

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The cards have been shuffled in Iowa once again and another candidate, Rick Santorum, is surging ahead.  That leaves the two top candidates – Mitt Romney and Ron Paul scrambling to avoid being trumped.   The six top GOP candidates await today’s results in the Hawkeye State (while Jon Huntsman sits out Iowa to focus on New Hampshire).

With the economy still front and center as a new year kicks off, many of the Republican presidential candidates have staked out positions on the federal debt and debt ceiling, spending cuts, Medicare and entitlement reform, taxes and ways to kick-start a lackluster economy. Here is a summary of where the top GOP candidates stand on some of the most pressing fiscal issues of the day:

If nothing else, Romney, 64, has been consistent.  Most of the polls this year have him at 25 percent of the primary vote making him the slow and steady the front-runner for the Republican nomination.  One reason:  he’s willing to spend his personal fortune, which exceeded $200 million in 2007. 

The former Massachusetts governor, who first ran for the Senate in 1994 against the late Sen. Ted Kennedy after a successful career as a business consultant and investment fund manager, has been stressing jobs and the economy in his second quest for the White House.

Last September, Romney unveiled a 160-page plan to turn around the economy and spur job creation, through fundamental tax reform, rewriting and eliminating government regulations, trade initiatives to open new markets, confronting China on unfair trade practices, and new fiscal policies.

Romney vowed that, on his first day in office, he would submit a major jobs package to Congress and would seek legislative approval of those measures within 30 days. Those bills would include:

  • The American Competitiveness Act:   Reduce the corporate income tax rate to 25 percent
  • The Domestic Energy Act:  Directs the Department of the Interior to undertake a comprehensive survey of American energy reserves in partnership with exploration companies and initiates leasing in all areas currently approved for exploration
  • The Retraining Reform Act: Consolidates the sprawl of federal retraining programs and returns funding and responsibility for these programs to the states
  • The Down Payment on Fiscal Sanity Act: Immediately cut non-security discretionary spending by 5 percent in order to reduce the annual federal budget by $20 billion

Romney also promised to issue executive orders to pave the way for ending President Obama’s health care reform law, for eliminating government red tape, for speeding up government issuance of oil and gas drilling permits, and to address Chinese currency manipulation and to consider imposing countervailing duties on Chinese imports.

He has received high marks from conservatives for his hard line against illegal immigration, which he said is cutting into U.S. resources and job opportunities. But the flip-flopper charge successfully leveled against him by Sen. John McCain, R-Ariz., in the 2008 GOP primary has haunted him during the 2012 campaign, in large part because as governor he signed a sweeping health care reform bill that served as the model for President Obama’s Affordable Care Act.

Over the years, Romney’s rightward march on social issues has mollified social conservative critics (he once embraced a woman’s right to choose, declaring in 1994, “abortion should be safe and legal in this country”). And his business background and experience as governor give him credibility on economic issues.

“We are only inches away from ceasing to be a free market economy,” he said back in June. “I will cap federal spending at 20 percent or less of the GDP and finally, finally, balance the budget.” As governor, however, he balanced the Massachusetts budget by raising taxes and fees as well as by cutting spending. 

A spirited Texas House member known for his often-unorthodox commitment to Libertarian ideals, Paul announced his presidential candidacy (his third) last May. The 76-year-old obstetrician and Air Force veteran has been in and out of Congress since 1976 and is regarded by some as an originator of what has evolved into today’s Tea Party.

A free-market enthusiast, Paul has proposed getting rid of any program, law or agency that he sees as impinging on the free market or violating the Constitution, which has earned him the nickname “Dr. No.”Paul also says he wants to: 

  • Balance the federal budget 
  • Eliminate the Federal Reserve
  • Defund five Cabinet departments (including Commerce, Interior and Education) to save over $700 billion over four years
  • Eliminate the supplemental nutrition program for women and children at the Department of Agriculture
  • Bring home all American troops from Afghanistan and Iraq, and…
  • Legalize pot.

Paul, of course, has twice before campaigned for the presidency, once in 1988 as the nominee of the Libertarian Party, and again in 2008 as a candidate for the GOP nomination. Then, as now, he plans to shrink the federal government. One way to do that is by for privatizing certain government functions, like the air-traffic control system.

Paul founded the Foundation for Rational Economics and Education (FREE) in the 1970s, a tax-exempt organization that publishes newsletters, including “Ron Paul’s Freedom Report.” The Report espouses “an opportunity for greater public awareness of the limited-government principles that have been, until recently, absent from public debate.”

Although many agree with Paul’s positions on smaller government and lower taxes, they may bristle at his more controversial statements over the years about race and other social issues. 

On 9/11:

  • Paul was the only Republican to vote against the Iraq War Resolution in 2008, claiming that the government used 9/11 as an excuse to curb civil liberties and invade Iraq.

On defense spending:

  • “Billions of dollars have been spent on the M-1 tank over the years and yet there has never been a need for it for the defense of our country – it was purely a military-industrial complex boondoggle to serve the interests of the demands of big business and big labor.” 

On taxes:

  • “’Taxes are the price we pay for civilization,’ according to Oliver Wendell Holmes. This claim has cost us dearly… If we as a nation continue to believe that paying for civilization through taxation is a wise purchase and the only way to achieve civilization, we are doomed.”

On unions and government labor laws:

  • “Union power, gained by legislation, even without physical violence, is still violence. The laborer gains legal force over the employer.”

In 1987, Paul denounced the GOP and left the party because of President Ronald Reagan’s inability to balance the federal budget, and declared himself a Libertarian. He opposes all foreign aid, would abolish the federal income tax and the Internal Revenue Service. Despite representing a rural district, he has voted against farm subsidies.

The former two-term senator from Pennsylvania, 53, has recently been surging near the top in Iowa polls, distinguishing himself  by having visited all 99 counties in the state (Bachmann has done the same) and logging more miles there than any of this GOP rivals. While Santorum’s profile in Congress as a social-issues crusader bought him entrée with influential evangelical conservatives in Iowa, his unrelenting attack on liberals also seems to have fueled his rise.

Santorum, married and a father of seven, has aligned himself with the Tea Party fiscally. A lawyer by training, Santorum has said that he favors job creation through private business expansion and supports a reduction in government regulations. He’s also called for overhauling Social Security.
Santorum has called for a major economic plan that empowers American families and creates new jobs with a “smarter and simpler tax code.” His proposals, among other things, would:

Cut and simplify personal income taxes by cutting the number of tax rates to just two - 10 percent and 28 percent returning to the Reagan era pro-growth top tax rate.

  • Simplify the tax code and reduce middle income taxes by eliminating the Alternative Minimum Tax (AMT) and eliminating the estate tax.
  • Lower the Capital Gains and Dividend tax rates to 12 percent to spur economic growth and investment
  • Reduce taxes for families by tripling the personal deduction for each child
  • Reduce and simplify taxes for families by eliminating marriage tax penalties throughout the federal tax code
  • Retain deductions for charitable giving, home mortgage interest, healthcare, retirement savings, and children
  • Cut the corporate income tax rate in half to make businesses competitive around the world, from 35 percent to 17.5 percent

Santorum has publicly supported Paul Ryan’s “Roadmap for America” budget plan to overhaul Medicare and cut federal spending. Santorum has said he is opposed to raising the debt ceiling unless the legislation is linked to spending cut measures to get “our exploding debt under control.”

As for health care reform, Santorum has said President Obama’s new health care reform law should be repealed. “Every American should have access to high-quality, affordable health care, with health care decisions made by patients and their physicians, not government bureaucrats,” Santorum says on his website. “America needs targeted, market-driven, patient-centered solutions to address the costs and underlying causes of being uninsured rather than a one-size fits-all, government-run health care system.”

The Texas Governor, 61, who entered the race in August, is staking his candidacy largely on his flat-tax proposal. Unlike other reforms of this kind, it omits a national sales tax, which many conservatives perceive as a back door for government hike taxes.

Perry’s plan, dubbed “Cut, Balance and Grow,” would give individuals and corporations the option of paying a 20 percent flat tax rate on their personal income or sticking with the current code, which has six tax brackets for individuals and a maximum 35 percent corporate tax rate. It eliminates taxes on capital gains and dividends, the estate tax, the alternative minimum tax, and corporate subsidies but preserves the mortgage interest and charitable contribution deductions.

The governor’s plan also preserves state and local tax exemptions for households with incomes less than $500,000 a year. It calls for a temporary tax holiday on corporations looking to bring overseas profits back to the U.S. – lowering the repatriation rate from 35 percent to 5.25 percent. It hikes the standard deduction for individuals from $11,600 to $12,500. And it seeks to restrict federal spending to 18 percent of GDP, institute a balanced-budget amendment to the Constitution, and balance the federal budget by 2020.

Perry says his plan would save the federal government $483 billion in compliance costs. In the 1980s and 1990s, however, many GOP presidential candidates, including former Sen. Phil Gramm of Texas, media mogul Steve Forbes, and California Gov. Jerry Brown, tried and failed to institute flat-tax proposals. And the Perry plan still carries liabilities, including the likely added tax burden the middle class would have to pay for the plan’s high-income and low-income tax breaks, according to Marty Sullivan, a contributing editor at Tax Analysts.

A veteran of the House and a self-described historian, Gingrich, 67, loomed as a strong GOP contender for a while, and barely endured a series of campaign gaffes.  He had a strong comeback thanks largely to his debate performances but has been dropping again. 

The former Speaker of the House flirted with a presidential run in 2008 but then dropped the idea. This year, though, within his first week as a candidate, the fiscal conservative was on the defensive after blasting the House Republicans’ plan drafted by Rep. Paul Ryan to overhaul Medicare while defending a central tenet of the Democrats’ health care law.

Soon after, Gingrich disavowed his statement and embraced the GOP Medicare plan.

Gingrich has proposed a new flat tax plan to simplify the federal tax code and eliminate special interest write-offs and loophole, but he would give Americans the option of sticking with the current tax system. Gingrich calls for a 15 percent flat tax rate on individuals and a 12.5 percent corporate rate.

Under this plan, those opting for the flat tax would not be taxed on capital gains, dividends, interest, or Social Security, and would still be able to claim deductions for charitable contributions and mortgage interest. It would also do away with the estate tax, and the Alternative Minimum Tax. One problems is that the plan could cost the government a bundle, raising the deficit even more.

Gingrich would also give workers the option to choose the current Social Security retirement program or invest a similar amount of money (including the employer's contribution) into personal savings accounts that would be diversified to reduce risk and would earn market rates of return. The government would guarantee to pay the difference if a PSA returned less than Social Security ordinarily would. 

Gingrich has outlined proposals for “very serious deregulation” and strict limits on unemployment benefits after four weeks. He would eliminate the National Labor Relations Board, replace the Environmental Protection Agency, and repeal Obama’s national health care plan. Echoing House Republicans, Gingrich said he would generate revenue through growth, not taxation, to jump-start the economic recovery.

Nobody can deny that Tea Party maven Bachmann, R-Minn., has ambition and firepower. But it’s still unclear whether the ultra-conservative constitution-enthusiast can appeal to Republicans outside the Tea Party.

A former tax attorney, Bachmann, 55, was elected to Minnesota’s 6th congressional district in 2006 after serving six years in the state Senate. A born-again Christian, Bachmann first appeared on the public radar in an October 2008 MSNBC appearance when she called then-presidential candidate Barack Obama and other Democrats “anti-American and urged Congress to probe the issue. She went on to raise more than $11 million for her 2010 reelection bid — the most by any House candidate — and to form and lead the official House Tea Party Caucus.

After the election, she was passed over for a House GOP leadership post, but stayed in the spotlight when she delivered the first-ever Tea Party rebuttal to President Obama’s 2011 State of the Union Address, separate from the official Republican rebuttal from House Budget Chairman  Paul Ryan.

One of the most conservative members of the House, Bachmann adamantly opposes any form of tax increase and favors limiting the size and scope of government. She wants to lower the corporate tax rate from 35 percent to 9 percent and eliminate the capital gains and estate taxes. Though she staunchly opposes raising the country’s $14.3 trillion debt limit without significant spending cuts attached, she has called the debate “a gift on a platter” for Congress to show it’s serious about controlling the deficit. She has also accused Treasury Secretary Timothy Geithner of exaggerating and scare-mongering by saying failure to raise the debt limit could lead the U.S. into a catastrophic default. She favors “weaning” Americans off Medicare and Social Security.

While she voted for the House Republican plan for overhauling Medicare, she subsequently came out in favor of repackaging that proposal as “the 55 and under plan,” to make sure current seniors realize their benefits would be protected. She has also vowed, if elected, to submit only balanced budgets.

Parts of this article were published on June 3, 2011.  Michelle Hirsch of The Fiscal Times, as well as Jennifer DePaul and Adam Corey Ross, contributed to this report.