Kemp Forum "Game Plan"

At the start of the new Congress, the Kemp Forum issued a “call for ideas” to former Kemp staff, friends and supporters engaged in current public policy debate, taking as their touchstone themes derived from Kemp speeches.  The Foundation is pleased to present these original essays on contemporary issues.  We invite your comments and observations.

(Essays by Bentley Elliott, Paul Ryan, Judy Shelton, John Mueller, Bill Brock, Joe O. Rogers, Charles Kupperman, William Schneider, Frank Keating, Alfred A. DelliBovi and Don Soifer)

Bentley Elliott: Freedom and Faith

Updated: Feb 20

“The most revolutionary idea in human history is that progress and prosperity are the result of individual freedom and faith in God” — Jack Kemp

When Eric Liddell, the famed Scottish Olympic runner was asked in the epic film, “Chariots of Fire” why do you persist in running in the midst of snow, rain, wind and mud, he answered: “I believe that God made me for a purpose, but he also made me fast. And when I run, I feel His pleasure!”

That electrifying idea goes directly to the heart of Jack Kemp’s core beliefs – namely, that each of us was made in the image of our Creator, that we were brought into this world for a purpose, and that when we are free to develop the unique gifts and talents which God gave us, we can feel His pleasure – and we can achieve truly great things!

Jack Kemp believed passionately that each and every life has value and thus, “People are not a drain on our resources, people are our resources.”

The universal and timeless promise of our inalienable rights to life, liberty and the pursuit of happiness was his personal and political lodestar.  He said “If your dream is to be a factory worker, farmer, computer programmer, mezzo soprano, Olympic athlete or, he would add with a grin, a Congressman from upstate New York, nothing should stand in your way to go as high as your God-given talents will take you.”

The power of those two, animating ideas – our freedom and faith – tell the story of every American’s priceless birthright, and the driving force of our country’s unparalleled progress and prosperity.

Because we are children of God, we are born with boundless possibilities. Let no one put limits on our lives. Because we are born free, we should have the opportunity to make our hopes and dreams come true. And, because we are Americans, each successive generation has the responsibility not only to preserve our hard-won gains, but also to push ahead toward a higher purpose – a truly exceptional future – that can be greater, stronger, and better than we knew ourselves.

As the Republican Party sets out on its new journey of leadership, it can draw inspiration and guidance from Jack Kemp the man and from his belief in the abiding importance of faith and freedom within our nation.  His ideas can serve as important guideposts for our vision, values and policies along the way.

First, Jack Kemp would certainly believe that the Republican Party, the Party of Lincoln, must distinguish itself by offering a superior vision of leadership at home and in the world.  The Republican Party brand should become synonymous with growth, opportunity and upward mobility that will encompass, embrace, and encourage all Americans and people everywhere.

Jack Kemp pointed to his own father as the person in his life that best embodied the American Dream. “If you drive a truck as my Dad did,” he loved to say, “then you should have a chance to buy that truck, and one day, to buy the truck company!” This is the American Idea as envisioned by the Founders and reaffirmed by his personal hero, Abraham Lincoln.  In Lincoln’s words, “The progress by which the poor, honest, industrious and resolute man raises himself, that he may work on his own account, and hire somebody else…is the great principle for which this government was really formed.”

“Wow!” we can almost hear Jack exclaim today. “Imagine the country we can build if we empower millions of people to take their destiny into their own hands.  Imagine the future we can hand over to our children and grandchildren, if America’s highest priority is not a bigger safety net for more people to fall into, but a bigger ladder for more people to climb!”

So, first, a superior vision for a stronger America.

Second, the Party of Lincoln that offers a great vision must also defend, as Jack Kemp forcefully did, the Judeo-Christian values that are the rock upon which our country and civilization stand.  When Thomas Jefferson and the Founders articulated our inalienable rights to life, liberty and the pursuit of happiness, they declared that we are endowed with those rights by our Creator, and that a government was being formed not to seize, shrink or supervise our rights, but to secure them.

As the Founders’ believed that we are all equal under God, they also acknowledged that we live under the “laws of nature and of nature’s God.” In other words, they believed that the God who gave us our rights also gave us responsibilities. The God who created and designed the universe in an intelligent and orderly manner also gave us moral and spiritual principles to build a prosperous and stable society. He imparted these obligations through the lives and teachings of the great figures of the Bible, starting with Moses delivering the Ten Commandments and culminating with the awesome person, power and promise of Jesus Christ.

But, here again, it is God, not government, to whom we owe our first and highest allegiance.

It is God, not Barrack Obama, Harry Reid or Nancy Pelosi, for all their attempts to direct our futures, who tells us the meaning of virtue, and how we are required to live our lives, for example, Micah 6:8 – “to act justly, love mercy and to walk humbly with our God.”

And it was Jack Kemp who reminded us that Republicans don’t believe in the Government Shepherd, we believe in the Good Shepherd.  We don’t mobilize government as our first alternative to deal with problems, but rather, we lead citizens to act within their communities, and we focus government action to break down barriers to opportunity.  He dismissed the politics of class conflict and redistribution, of diminishing one person to elevate another, and of inciting envy and coveting our neighbors’ goods as unworthy of America, and bound to fail everywhere and every time they are tried.

Third, from a superior vision resting securely on our nation’s heritage, Jack Kemp would challenge the Republican Party to champion the ideas and policies that can unleash freedom and give all citizens their chance to fulfill their potential and to achieve a great purpose.

Jack concentrated first and foremost on taxes as he understood that the tax system is the crucible of freedom and growth, but it also has the power to destroy. And, he made the common-sense observation that we will not fix the budget deficit – and truly control spending in Washington – before we fix the growth deficit in America, the deficit in jobs, hopes and opportunity.

Toward that end, Jack Kemp understood that not all tax proposals are created equal. One-time tax rebates that have zero impact upon incentives do not advance freedom and prosperity and have had no demonstrable record of success – under Presidents Ford, Carter, and George W. Bush. Tax credits under President Obama, whereby government grants credits against taxes due in return for our doing what government prescribes have been notably unsuccessful.

However, lower tax rates on labor and capital that reward people for working, saving and investing do strengthen freedom and opportunity for each individual, and they have worked every time they’ve been tried: in the 1920s, in the 1960s under John F. Kennedy, and in the 1980s, when the Kemp-Roth bill became part one – the crown jewel – of the Reagan tax program, which ultimately lowered the top tax rate from 70% to 28%.

Yes, but didn’t the deficit skyrocket?  Actually, as a percent of GDP, the deficit rose only slightly – from 2.6% to 3.1% — over the course of the Reagan Presidency, thanks to powerful economic growth averaging 4.8% in the four years following the tax cut. In fact, tax revenues nearly doubled and continually exceeded economists’ expectations.  Increased spending was driven largely by higher military expenditures.  Of course, the result of America’s stronger military was peace through strength – leading to the fall of the Berlin Wall, the end of the Soviet Union, and the liberation of millions of people across Eastern Europe – just as President Reagan predicted we would see.

Military spending that confined the Soviet Empire to the dustbin of history was not a bad investment.

Yes, but don’t lower tax rates still unfairly favor the rich?  Jack Kemp pierced this uncritical thought by noting that the rich will always find ways to shelter their wealth. Lower tax rates don’t help the rich so much as every person in America trying to get rich and achieve the American Dream. That was the secret weapon of Reaganomics — an enormous, powerful, rising tide of growth through investment, innovation and new business starts that led to a decisive victory over stagflation; dramatic reductions in interest rates, inflation and unemployment; the creation of 16 million new jobs; $15 trillion in new wealth that benefited every income category; a more than doubling of the Dow Jones Industrial Average and the S&P; and, the launching of a 20-year global expansion that saw America’s economy sprint ahead to undisputed global preeminence.

The success of Reaganomics provides an indispensable roadmap for America’s future. Facing today’s struggling economy, Jack Kemp would surely insist that the Republican Party has major work –historic work – to do on reducing tax rates, spending and over-regulation.  During his life, he strongly believed that the next, critical milestone should be a tax system that is flatter, fairer and simple enough for Americans to fill out their taxes on a postcard.  Importantly, he would remind us that the spending adjustments on entitlements, which all Republicans agree are necessary, will be far more achievable in an environment of robust growth, than within today’s anemic economy that continues to under-perform.

He would challenge the Republican Party to be bold – to commit America to full employment without inflation, and to protecting the value of every citizen’s earnings, investments and nest egg through a strong and stable dollar that is as good as gold.

Finally, like his heroes, Jack Kemp understood that the principles of prosperity are not confined to one time, people or place. He revered America for being the only nation in history that has linked the success of our democracy with the hopes and dreams of people everywhere.  Just as he condemned the politics of division and class warfare in our economy, so, too, would he warn that isolationism, protectionism and weakness in the world risk the same tragic results today as in the 1930s.

A Republican Party that dedicates itself mind, heart and soul to the American Idea of progress and prosperity through freedom and faith – to the vision of Jefferson, Lincoln, Reagan and Kemp – can recapture and control the high ground on the battlefield of ideas for America’s future.  That party, in turn, will be the party that can lead us forward toward a truly great purpose – one where America, once again, is a nation that is set apart and whose citizens rise above.

(Ben Elliot was Chief Speechwriter for President Ronald Reagan and later for Rep. Jack Kemp, and currently writes for the Bank of America.)

Paul Ryan: Economic Growth

Updated: Feb 20

“It is not enough to be against something; you have to tell people what you are for.” — Jack Kemp

My mentor Jack Kemp was not just another political leader or public official.  His impact on the nation’s prosperity and well-being was out of all proportion to the positions he held in government and all the more astonishing for his never having attained the Presidency to which he aspired.

There are two ideas in particular about which Jack was an impassioned advocate: pro-growth tax cuts, and sound and honest money.

The first idea was to establish a national fiscal policy based on a broad-based reduction in tax rates in order to create incentives for business and job creation in a slow economy.  For years he was a voice in the congressional wilderness, tirelessly pitching his deep income tax cut proposal to uncomprehending colleagues.  It is easy to forget that Jack’s “supply side” gospel was met with the ridicule and scorn of conventional experts who lacked his economic imagination.  They could not grasp how lowering tax rates on individuals would increase incentives and boost economic activity.

In a sense Jack was prophesying to an audience of one: the comprehending, imaginative, and unconventional Ronald Reagan.  The Republican candidate for President in 1980 was convinced that Kemp was right.  He saw that the policy of increasing after-tax rewards for entrepreneurship and job expansion could be a key factor in reviving a stagnant economy.  President Reagan first carried the case for across-the-board tax cuts to the American people in the election, and then to Congress to enact what became known simply as Kemp-Roth.  The long economic expansion that began soon afterward confounded Jack’s critics and reduced opponents to stunned or sullen silence.  Today supply-side fiscal policy is still considered a reasonable approach to the problems of stagnant economies.

Kemp also understood that sound and stable money was an important precondition for sustainable, long-run growth. Jack believed that since President Nixon ended the Bretton Woods international monetary arrangement which had linked the dollar to the world gold price, the Fed’s experimentation with fiat currency had resulted in periodic bouts of inflation and deflation, creating an unnecessary barrier to long term expansion of the national economy and international trade.

On May 17, 1983 Kemp and Professor Robert Mundell convened an international monetary conference in Washington, featuring a high-powered group of US officials and world renowned economists.  The central issue was the need for international monetary reform, including the topics of fixed versus floating exchange rates and dollar stability.  In his concluding summary, Jack said:

We have a short-run problem and a long-run problem.  The short-run problem is how to bring about economic recovery and reduce unemployment and restore the credit worthiness of the borrowing countries.  The long run problem is how to sustain the recovery without a return to yet another deadly cycle of inflation, high interest rates, and ultimately, another major recession.  Professor Mundell warns that recovery will be choked off unless we can reform the monetary system in a way which restores confidence in the world’s money.

In the years that have gone by since, our monetary experiences have varied.  At times when the Fed apparently practiced a rule-based monetary policy, the US and global economies grew with low inflation.  When such implicit rules were abandoned, the economy of this nation and many others fell off course.

Since the late 1970s, when Congress endangered the Fed’s independence by tasking it with a dual mission of promoting “maximum employment,” in addition to maintaining stable prices, the Fed has struggled to steer a middle course between inconsistent goals.   Kemp often referred to the Phillips curve, according to which there is a trade-off between inflation and unemployment: the lower the one, the higher the other.  The Fed’s dual mandate implicitly rests on Phillips curve thinking—the Keynesian monetary approach which Kemp largely blamed for the economic conundrum of President Jimmy Carter, when both unemployment and inflation were rising at the same time.

Both aspects of the Fed’s dual mandate are obviously central and critical to our expectations from modern government.  But monetary policy itself cannot simultaneously meet both goals, nor can it do the job of sustaining a full employment economy.  That is the proper task of fiscal policy.  Jack believed that the Fed should have a single mandate: to maintain price stability, ensuring that the nation’s money remained sound over time.  A dollar whose value is stable and secure by virtue of Fed policy is the necessary condition for job creation and solid growth.  The sufficient condition is a pro-growth fiscal policy of low taxes and spending restraint, for which Congress is solely responsible – plus a regulatory regime that does not create barriers to entrepreneurial expansion, for which the legislative branch is ultimately responsible as well.

Unlike the Kemp-Roth 33% across-the-board tax rate cut proposal, Jack never promoted one specific plan for returning the country to rule-based monetary policy.  He did, however, concentrate increasingly on the international monetary system, favoring a Bretton Woods-style format that would incorporate the market price of gold into the Fed’s decisions to expand or reduce the money supply.  He sometimes suggested utilizing a “basket” or index of commodities, including precious metals, to serve as a surrogate price index.  He believed that a dollar whose long-term value would be stabilized and secured by some linkage to gold would resume its place as the currency leader of the world, and would be followed by other nations under formal agreements or informal practice.  In effect this would stabilize world currencies and open up vast new possibilities for expanding international trade and worldwide economic growth.  Aware of the close relationship between economic and political issues, Jack expected that the potential for global economic growth would in turn encourage movements in oppressed nations against tyranny and for democracy as well as enhance prospects for peace.

As I write, the Fed has begun its latest monetary experiment in “quantitative easing,” pumping another $600 billion into the world’s dollar reserve glut in an effort to depress bond and interest rates even further and restart job creation in the US.  The current Fed chairman claims he is acting on evidence of disinflation to avert the possibility of deflation.  Backward-looking indices such as the consumer price index (CPI) are not yet showing that inflation has reached two percent, so the Fed feels justified in deluging the world with dollars, ignoring leading indicators of inflation such as gold and commodity prices, which have risen rapidly in anticipation of future inflation. The Fed’s decision to ignore commodity inflation has real consequences for real people. Rising oil prices increase the cost of the fuel people need to get to work. Rising cotton prices increase the price they pay for their children’s clothing. It all adds up to a lower standard of living for many Americans – and the Fed’s latest actions are only making things worse.

While I do not share his specific policy prescription for a return to the gold standard, Kemp’s “voice in the wilderness” on dollar stability and gold is not as lonely now as when he first raised it in the 1970s.  America’s economic experiences, good and bad, of the last 30 to 40 years have brought new and surprising attention to Jack’s unfinished monetary agenda.  Alan Greenspan, former Fed chairman, recently said: “Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”  The current President of the World Bank, Robert Zoellick, is calling for an international currency system possibly involving the dollar, euro, yen, pound and yuan.  His recent article in Financial Times, echoing Kemp’s ongoing challenge over his career, argued that gold could become an “international reference point of market expectations about inflation, deflation and future currency values.”  In one form or another, world leaders from President Sarkozy of France and the EU to Prime Minister Mahathir of Malaysia have voiced growing interest in international or regional arrangements relating currencies to the value of gold.

It was my privilege to have worked with Jack at Empower America in the mid-1990s.  His passion for price stability as the proper goal of monetary policy never faded after he left office.  I have introduced legislation to eliminate the Fed’s self-contradictory “dual mandate” and refocus monetary policy on the single mandate of price stability.  I will reintroduce this proposal in the new Congress that meets in January 2011.

Many European governments are now wracked with the harsh consequences of decades of reckless big government spending programs and are now being forced to impose unpopular austerity measures while looking for ways to open their markets to free enterprise and competition.  There is a rapidly approaching debt crisis in the US as well, but these consequences can still be avoided if Congress reasserts its fiscal responsibilities to reform our national entitlement programs to safeguard their security, and reorder the individual and business tax code to promote job growth and prosperity.

Both the national economies now in trouble, and the US in its effort to avoid their fate, could be helped immensely by the re-establishment of an international regime of sound and stable currencies.  Jack Kemp developed a gold mine of principles and proposals to address this very problem.  The US – as well as the world’s monetary order – could not be better served than to reconsider his prophetic insistence that prosperity must begin with sound and honest money.

(Congressman Ryan (R-Wisconsin) is the Speaker of the United States House of Representatives)

Judy Shelton: Sound Money

Updated: Feb 20

“America needs a dollar that is once again an honest dollar, as good as gold.” — Jack Kemp

Jack Kemp was sometimes referred to as “Mr. Gold Standard” for his ideas on the need to anchor the dollar to a measure of value that was both enduring and universally recognized.  Even if political pundits used the term in a derisive way – how crazy to imagine going back to a gold standard in these modern times – Jack Kemp never took it that way.  He knew that the notion was sound at both the domestic and global level, an idea consistent with the political philosophy of Thomas Jefferson as well as the vision of Nobel economics laureate Robert Mundell.

As the United States today wrestles with fiscal dilemmas that threaten to downgrade its credit rating as an investment – even as our trade partners and allies accuse us of engaging in beggar-thy-neighbor policies of competitive depreciation of our currency to gain a trade advantage – it is more than nostalgia that prompts us to reconsider the ideas so boldly defended by Jack Kemp throughout his distinguished political career.

We need to once more find that lodestone, that reliable measure of value, on which to anchor the value of the dollar.

Americans need to know that their nation’s monetary unit of account provides an accurate and consistent measure, so that price signals convey true value to the marketplace.  It’s the only way the real economy can function properly to maximize opportunity and deliver optimal levels of economic prosperity.  At the same time, America’s role in the global economy will continue to erode along with the integrity of our currency if we do not reassert the fundamental notion that money is meant to serve as a tool of free enterprise – not an instrument of government policy.

How can both these objectives be achieved in a unified manner?  How can we restore honest money at home while strengthening the role of the dollar as a global reserve currency?

By linking the dollar to gold, as Jack Kemp sought to do with rigorous adherence to global economic theory, the U.S. could establish a new position of leadership that would lay the groundwork for a restructured international financial architecture consistent with American values of economic freedom and personal responsibility.  Nations willing to move to a gold anchor for their currencies would be acknowledging their commitment to free trade and individual opportunity based on a level playing field; no longer would currency gyrations undermine genuine competition and thwart authentic free market outcomes.  No longer would financial capital be misdirected and the value of economic assets be distorted through manipulation of the monetary standard.

Congress is empowered through the Constitution to “regulate” the value of money, but this authority was conveyed in the same sense as the power to fix the standard of weights and measures – indeed, both of these responsibilities are described in the same sentence appearing in Article I, Section 8.  Notably, that power is explicitly granted in terms of authorizing the right to “coin” money, not print it; the duty of Congress was to define the U.S. dollar in terms of a specific weight of gold or silver and with respect to foreign coin already circulating within the fledgling nation.

Thomas Jefferson proceeded to do so, writing in 1784: “If we determine that a Dollar shall be our Unit, we must then say with precision what a Dollar is.”  By 1792, the value of the dollar was fixed through the Coinage Act at 371.25 grains of pure silver or 24.75 grains of pure gold.  Furthermore, Mr. Jefferson argued that it would be a violation of the Tenth Amendment, going far beyond the enumerated powers described by the Constitution, to empower the government to issue “bills of credit” that had to be accepted as legal tender.

Obviously, we have moved far away from the principles of the Founders who early recognized the potential for abuse of the monetary privilege by government.  Today, our nation’s money is issued by an agency so aligned with the fiscal interests of the U.S. government – the Federal Reserve stands ready to make unlimited purchases of Treasury securities – that any attempt to suggest it operates independently is simple not credible.  No wonder people are flocking to gold as they flee government-supplied money.

The nexus between providing a stable monetary foundation for domestic growth and forging an international monetary order devoted to free markets and free trade is the one so often invoked by Jack Kemp.  “Gold convertibility may not be fashionable,” he noted in remarks before the Federal Reserve Bank of Atlanta and Emory University in March 1982, “but I am convinced that it is imperative, for the simple reason that if we do not choose to remonetize gold, people in the market will progressively choose to demonetize the dollar.”

In calling for a reliable monetary standard, Kemp was always mindful of the moral dimension of sound money.  “People trade with each other in time because they believe they will not be defrauded by a change in the currency,” he often stated.  For Kemp, the restoration of an honest dollar with predictable and constant value over time would not only serve the best economic interests of the American people, it would also assist countries who “currencies and fates are tied to ours.”  Most importantly, perhaps, it would help move the whole world toward liberalized trade and strong growth.

How best to achieve the objective of a sound dollar and a stable international monetary system?  Kemp argued strongly for convertibility of Federal Reserve notes and credit into gold on demand and for establishing a system in which official international settlements are made in gold:

We need gold convertibility because it’s not enough to simply have a rule for monetary policy; there must also be a mechanism for putting it into effect.  The most stable monetary mechanism we have seen was the classical international gold standard.

Kemp recognized that the same values and lessons that apply to whole nations striving to succeed within the global economy are also applicable to individual workers, savers, investors, businesses, and families.  He was quick to note that people are creditors when they save for their children’s college education or for retirement.  They are debtors when they borrow to buy a house or start a business.  They deal with exchange rates when they travel or shop for an automobile – or when the local steel plant lays off workers because of imports.   They experience the high cost of capital when they take out a car loan.  They experience the depreciation of money when they buy food at the supermarket.

As Jack Kemp so insightfully realized, monetary issues are hardly remote from the daily experiences of most people.  He saw monetary reform as a popular, blue-collar, bread-and-butter policy proposal – a winning political idea.  At the same time, he had the foresight to comprehend that America’s leadership in the world should not be taken for granted; it requires us to adhere to core principles of integrity which extend to the reliability of our own monetary standard.  As Kemp boldly affirmed in his 1988 presidential campaign speech:

I am a radical believer in the idea that the dollar should be so honest, so sound, so trustworthy, so good, so predictable, so lasting in value, that it’s as good as gold.

Championing the cause of sound money was more than good politics, though.  It was a matter of commitment to the highest ideals of a nation dedicated to growth, opportunity, and the advancement of human dignity.  From Kemp’s perspective, the dependability of the dollar testified to the destiny of the nation.  He believed the dollar should be as honorable and steadfast as the American idea itself.

(Ms. Shelton, senior fellow at Atlas Economic Research Foundation, is author of Money Meltdown: Restoring Order to the Global Currency System.)

John Mueller: Fair Taxes & Social Security

Updated: Feb 20

America needs “a tax code that is flat, fair, and simple—one that rewards work and entrepreneurial risk-taking, that sets economic growth for all as its highest goal.” — Jack Kemp

The 1980 Reagan-Kemp fiscal strategy succeeded not just economically but politically. (It was implemented in the 1981 Kemp-Roth tax-rate cuts, 1983 plan to balance Social Security, and Tax Reform Act of 1986.) Since party allegiance varies with the level and source of voter family income, treating workers and investors even-handedly united a majority of Republicans, “Reagan Democrats,” and Independents.

The Fair and Simple Tax reform plan replicates this strategy by combining reforms to the income and payroll taxes. The income tax would be reformed by imposing a single flat tax rate on all labor and property income. All deductions, exemptions and credits would be eliminated except a single credit, based solely on family size, equal to the income and payroll tax rates, up to an income exceeding the poverty level for a family of four. (The flat tax rate was initially estimated at 18 percent when paired with a Social Security payroll tax cut of about 3 percentage points as part of the Fair and Simple Tax plan to balance Social Security.) For administrative simplicity the tax would be levied as part of the cost of goods and services purchased (including new investment property) rather than on the same income when received by workers and owners of productive property. This means the income tax would be collected only from several million employers rather than more than 140 million households. The plan would also end the Alternative Minimum Tax and similar tax monstrosities. Estates would not be taxed separately, as long as the flat tax rate was applied to all realized capital gains. As is the practice with most of our trading partners, to be consistent and avoid multiple taxation of the same income, the tax would be levied on imports and rebated on exports.

Because the Fair and Simple Tax plan includes all property income (e.g., interest, dividends, and capital gains) while other forms of the flat tax exclude such property income while “expensing” investment in productive property, the Fair and Simple Tax plan has the broadest possible tax base, the lowest possible marginal income tax rate, and the greatest incentives for working, investing, and risk-taking.

B. America needs “a safety net below which people should not be allowed to fall but, more important, a ladder of opportunity upon which all people can climb.”

As Ronald Reagan and Jack Kemp correctly saw, Social Security’s problems are not due to the program’s pay-as-you-go structure but rather the prospective size of promised benefits. The program’s main problems have always arisen from its not being kept on a pay-as-you-go basis. The dominant faction in each party seeks to “cure” this problem by actually increasing the current and prospective imbalances, even though such cross-subsidization is always politically unpopular as well as economically inefficient. Since about 1990, Social Security has been collecting about 25 per cent more from workers in payroll taxes than necessary to pay current retirement benefits. In other words, workers have been subsidizing from their labor income general government operations that ought to be paid for with an income tax on both labor and property income. Yet over the next couple of decades the situation is expected to reverse so that annual benefits will exceed annual payroll tax revenues by a similar proportion. Democrats have proposed to “solve” this problem by raising income and estate taxes, thus forcing property owners to pay for worker’s benefits. This would necessarily raise the cost of hiring and the unemployment rate as in Europe. Meanwhile, Republicans want to divert the surplus payroll taxes from Social Security to subsidize property ownership through tax-advantaged financial accounts paid for with general revenues. By further reducing families’ after-tax labor income, this could only reduce the birth rate as in Europe.

Since the birth rate is inversely proportional to the level of social benefits, to prevent fertility from declining in the U.S. as in most of Europe and Asia, total social benefits must not be permitted to increase as a share of national income beyond the 2001 level. Each program must be balanced annually on a pay-as-you-go basis (thus eliminating both the current trust fund surpluses and expected deficits).

The entitlement reform component of the Fair and Simple Tax plan adapts former Republican actuary Robert Myers’ suggestion by cutting the OASDI payroll tax rates immediately by 25 percent (about 3 percentage points), thus returning the current trust fund surplus to American working families, to invest without restriction in raising and educating their children or in corporate stocks and bonds, depending on their family situation. Prospective deficits would be removed at the same time by phasing in a reduction of equal proportion in promised benefits, prorated for the number of years the workers received the payroll tax cuts. (Increasing the retirement age would have a similar effect on the budget but would disproportionately penalize those with lower incomes, which are associated with shorter longevity.) New imbalances would then be prevented by automatically adjusting the benefits in inverse proportion to the birth rate and average life expectancy. Benefits would not be means-tested, however, as this would “welfarize” the Social Security system.

At the same time, Medicare and Medicaid would be reformed by linking each program’s benefits to prior payroll contributions and by maintaining overall annual balance in the same way as for Social Security. Rather than allowing current spending per recipient to drive the programs’ shares of national income, the calculation must be reversed, by starting with the current total shares of social benefits in national income and dividing by the number of eligible beneficiaries.

(Mr. Mueller, author of Redeeming Economics: Free Markets And the Human Person is Director of the Economics and Ethics Program of the Ethics and Public Policy Center and was Chief Economist and Speech Writer for Rep. Jack Kemp.)

Bill Brock: Leadership in Education

Updated: Feb 20

“Leadership is the ability not only to recognize problems, but to summon the wisdom, courage and determination to solve them before they become crises.” — Jack Kemp

Standing on the hotel’s eighty-seventh floor looking out over one of the largest and most modern cities in the world is an awesome experience. Reading in the daily paper that 15 year old students in that same city had higher student achievement in reading, math and science than any nation in the world was more than awesome, it was truly shocking. Educational performance at this level in one of the largest urban communities in the world? Impossible! Maybe so, but nonetheless true. The city, Shanghai, Shanghai China, with its nineteen million inhabitants. Oh. How about our kids, aren’t we the best?

The study, done by the Organization for Economic Cooperation and Development (OECD), reported that students in the United States were badly lagging not only those students in Shanghai, but also their peers in 16 other countries in reading, 29 other countries in math, and 22 other countries in science. How is it possible that America’s youth finished so far behind? This is no longer the old agri-industrial world in which we have been so dominant for so long. We now have to compete in a knowledge-based global economy. How can it be, then, that we are putting our very children at risk by failing to give them to tools to compete in that new world?

This is not new news. The first truly dramatic “wake-up” call to America came 27 years ago, when a national commission issued it’s study of our educational system called “A Nation at Risk”. They went on to suggest that if another nation was doing to our children what we were doing, we would consider it an act of war. In these intervening years, studies documenting the existence of an increasingly serious problem in our schools have come to our public attention countless times. It isn’t as if we have not been told, so if true leadership is the ability to recognize problems and exercise the wisdom, courage and determination to solve them before they become crises, where is that leadership? How is it possible that we do not recognize that we have a problem?

Perhaps we do. It is certainly true that leaders in both of our two major political parties have sought to address the situation. Three consecutive Presidents have pressed hard for new initiatives, determined to  get better results. Governors across the country have spoken eloquently of the compelling need. In fact, the United States spends more per child than any other nation save one. If money were the answer, we would not have a problem. Countless teachers and administrators in every school and every jurisdiction are working unbelievably hard. If hard work were the answer, we would not have a problem.

But we do. We do, and while it affects schools across all our states, it is most dramatically in evidence in communities where poverty has a strong grip on daily life. One has to wonder how long we would tolerate the inexcusably terrible schools their children must endure every day if our leaders were require to tell a local mother, face to face, a mother terrified to send her little girl to a school where drugs and violence are rampant and teachers are unqualified, or worse, uninterested, why they have no right to take that little child to a better school. The fact is that they cannot leave that district, for they cannot afford to move, and yet the “system” demands that they go to the designated school, no matter how dangerous, no matter how bad. It would be hard to find a better example of child abuse.

But caution. Caution, lest we believe that educational inadequacies are limited to poor schools in poor communities. The nations whose students are out-performing our kids have committed to educate every child, not just a select few, and they are beating us in every area of measurement. In so many words, if our performance lags across the board, urban, suburban, and inner city, we have a system that is broken, one that has lacked the capacity to adapt to the new world where critical thinking, innovation, communication and the like are the primary drivers of productivity, not rote knowledge.

Are we really, as has been suggested by the title of the incredibly moving movie documentary, “Waiting for Superman”? Or is it that we honestly do not know what to do? It is very hard to make that case when virtually every city of any size in America has a number of schools with the most challenged students from the most impoverished neighborhoods blowing the lid off results. It seems that we do know what to do; we just have to find those leaders with the wisdom, courage, and determination to make this the civil rights cause of this new century. Where are you, Dr. King? Please hurry. We need you.

(Senator Brock is the former Secretary of Labor, United States Trade Representative, and United States Senator from Tennessee.)

Joe O. Rogers: Civil Debate

Updated: Feb 20

“Unity for our nation doesn’t require uniformity or unanimity; it does require putting the good of our people ahead of what’s good for mere political or personal advantage.” — Jack Kemp

Of Jack Kemp’s many legacies, among my personal favorites was his absolute insistence that all debates be about ideas and never people.  In his office, there was a strict prohibition on any ad hominem discussions or attacks.  As a new generation of Republicans are finding their way in governing after an almost revolutionary election, this is a philosophy which should be well heeded.

An illustration of the power of this philosophy and the error of ignoring it came during very heated budget debates in the Republican Conference of 1983-1984.  The young turks who eventually created the Contract with America and famously fell from grace were rising to power.  Part of their strategy was to silence those Republican members who did not support their ideas.  Affecting a purge of Members with what they viewed as the most egregious voting records became a primary tactic to silence the rest.

While not a member of this group, Jack was their philosophical mentor and, more often than should have been necessary, held their leash when politics turned personal.   Sometimes, the leash slipped.

In one episode of high theater, the guns were turned on Congressman Bill Green of New York.  Green represented the silk stocking district of New York City, a focal point of the Chablis and brie liberalism which the young turks loathed.  Representing the views of his constituents and his own beliefs, Green had repeatedly vote against Reagan budgets and other initiatives and become a prime target for the purge.  Today, he would be termed  a RINO.

After repeated entreaties by Jack and Trent Lott, then the Republican Whip, to end this personal campaign and focus on the issues, and even President Reagan’s own conciliatory approach when he wrote Green thanking him for his support “when you could give it”,  a meeting of the Conference was demanded for what the turks hoped would be a reprimand of Green resulting in his expulsion from the Conference.

In a series of bitter personal attacks, Green was vilified by his own colleagues.  A courtly and relatively shy man, Green sat stoically through the session.  When his turn came, he hesitated briefly, then rose to speak.  Of all the words I heard in my years in Washington, I believe Green’s had the most immediate and telling impact and they should be remembered by those who would demand philosophical purity.  In a single sentence, he silenced his critics and ended the personal campaigns.

Green simply said “I hope my colleagues will remember, I defeated Bella Abzug.”

(Ambassador Rogers, visiting professor of Finance at Fudan University, Shanghai, was U.S. Ambassador to the Asian Development Bank and Republican Conference staff director under Rep. Jack Kemp.)

Charles Kupperman: Missile Defense

Updated: Feb 20

“The deployment of strategic missile defenses would do more to shift the course of history in the direction of greater freedom and a more secure peace than all the paper promises in the postwar era.” — Jack Kemp

The fact that ballistic missile defense is now a central element of US national security policy in the 21st century was at the core of Jack Kemp’s national security legacy. He recognized that the doctine of mutual assured destruction would not provide strategic stability and that deterrence of ballistic missile threats to the United States, its allies, and friends overseas was inadequate without the capability to intercept such missiles.  The US-Soviet nuclear balance– the impetus to the Strategic Defense Initiative (SDI)– revolutionized technology development and national security policy. The debate over the development of missile defense technology and its impact on US-Soviet relations raged throughout the 1980s. Jack Kemp was at the forefront of this debate. His vision and political leadership provided the basis for integrating ballistic missile defense into US national security strategy.

It was as much a debate over strategic nuclear doctrine as it was a debate over whether America possessed the technological capacity to intercept ballistic missiles before they struck their targets. The theology of arms control and the terms of US-Soviet superpower relations were called into question by President Reagan in 1983 when he initiated SDI.

Today, there are ground-based interceptors deployed in Alaska and California. There is a global network of ground-based, sea-based, and space-based sensors to track ballistic missiles should they be launched and to generate intercept solutions.  There are numerous cooperative missile defense programs underway with our allies and overseas deployments planned. The Soviet Union and the Soviet empire have expired and the US emerged victorious from the Cold War.

And it is none-too-soon given the nuclear threats from Iran and North Korea.

But it was far from certain that we would ever achieve the capabilities we now possess. The critics of missile defense were many; the opposition from the Soviet Union was intense; and the technical challenges daunting.

Five different Presidents have held office over the course of the missile defense program and each one benefited from Jack Kemp’s missile defense legacy.

Throughout the past 28 years, the voice of Jack Kemp has resonated. Jack Kemp drove the analysis of missile defense options. He pushed the aerospace industry, our national laboratories, and universities to deliver technology solutions. He led the way in the Congressional debates over the program and made sure the resources were provided. He was unstinting in his support when tests did not go as planned. His vision never wavered. He brought our allies into the program. And the history demonstrates Jack Kemp was right.

Our nation is more secure and our alliances are stronger because of the capability provided by ballistic missile defenses. As the 112th Congress addresses US national security requirements, Jack Kemp’s missile defense legacy rings out loud and clear.

(Dr. Kupperman, former Vice President for Strategic Integration at Boeing Corp, was the first executive director of Empower America; previously he served as Acting Administrator of the White House under President Reagan.)

William Schneider: National Security

Updated: Feb 20

“Economic freedom is inseparable from political freedom.”— Jack Kemp

Jack Kemp’s enduring interest in economic policy was enveloped in his belief that national security policy provided the indispensible shield within which democratic societies and market economies could flourish.  This interest led him to seek service on the Defense Appropriations subcommittee early in his Congressional career (1976) coincident with his celebrated successful effort to lower the marginal rate of taxation of income.  The policies shaped by the converging forces of democracy, economic development, and security we