Wednesday, September 24, 2008

Newt on the Bailout

On Sunday, Newt Gingrich penned an interesting piece on the proposed bailout. This was before all the hub-bub and all the arguing which has already began on Monday. I've said it before and I'll say it again, Gingrich is an incredibly intelligent man who is planning to run for President in 2012 the moment a Republican loses. And if he keeps proposing such thought provoking, conservative ideas like this -- I'd be willing to vote for him. Instead of a bailout, Gingrich proposes the following multi-tiered approach to help the economy --
1. Suspend the mark-to-market rule. Which is? The "rule" whereby whatever the stock is selling for immediately, is what it's worth to the person who bought it years ago. Gingrich wants them to reboot the system and establish a rolling average approach which covers an interval like three years, meaning -- instead of your stock you bought being worth exactly what the market is selling it for, it'd be worth a 3 year rolling average. It'd prevent a bit of the rapid paced buying and selling of stocks because...it's worth keeping your stock for longer than five minutes because the price went up.

2. Overturn Sarbanes-Oxley. Sarbanes-Oxley was passed in 2002, so we're beginning to feel the effects. It establishes all manner of accounting regulations, a mandatory $3 million per startup annual accounting fee (which Gingrich says is directly preventing some companies from going public), and a privately run entity (PCAOB) which has the power to enforce federal law...the Constitutionality of which is in the process of being challenged.

3. Drop the capital gains tax to zero. The capital gains tax, for those like me who aren't economics major, is the tax levied on capital obtained from selling or exchanging capital at higher rates than when you bought it. Gingrich says, "Private capital will flood into Wall Street with zero capital gains and it will come at no cost to the taxpayer. Even if you believe in a static analytical model in which lower capital gains taxes mean lower revenues for the Treasury, a zero capital gains tax costs much less than the Paulson plan. And if you believe in a historic model (as I do), a zero capital gains tax would lead to a dramatic increase in federal revenue through a larger, more competitive and more prosperous economy." I'd tend to agree.

4. Push for energy independence at home with an "all of the above" energy plan. He doesn't describe which one, but he includes drilling at home and searching for new energy sources in this clump.
That's it. Gingrich also goes into detail on the important questions we should be asking ourselves and the government with regards to this proposed bailout before it happens. I say we ask each and every one of these questions. We need to have transparency in anything of this magnitude. We need to know that when a new President takes over that the transition will be smooth. We need to know what, in the end, it actually means to the average American, to our economy, and to the businesses that are being "bailed out." We need to have these answers with tangible detailed analysis and, if not, we need to avoid any bailout proposals.

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