How the Economy Would Change Under Newt Gingrich

The GOP presidential candidate backs some familiar ideas, and some novel ones.

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He's an entertaining debater, with snappy comebacks and elaborate views on practically every issue that ever comes up. He's also spent decades inside the Beltway, with a better understanding than most candidates of the tradeoffs and arm-twisting needed to get things done in Washington.

[See how Obama can survive a 2012 recession.]

Newt Gingrich has surprised many pundits with his rise to front-runner status in the Republican presidential race. But his thorough policy prescriptions should come as no surprise, since Gingrich spent 20 years in the House of Representatives, including four as speaker—third in line for the presidency—from 1995 to 1999. Since leaving Congress, Gingrich has mostly stayed in Washington, working as a political consultant, Fox News commentator, and author of several books on topical political issues. For most of his adult life, he's been immersed in policy.

[See a slide show of how the economy would change under Gingrich.]

The economy is Issue 1 in the campaign, and Gingrich has as many novel thoughts about jobs and prosperity as about everything else. Some of his views follow Republican orthodoxy, but Gingrich also has some fresh ideas about how to rejuvenate the economy and reassert American leadership in the global marketplace. Here are 12 of Gingrich's economic priorities:

Keep income taxes low. Like many Republicans, Gingrich wants to keep tax rates where they are, for earners at all levels—in other words, preserve the Bush-era tax cuts, which are due to expire at the end of 2012. He also wants to eliminate the capital gains tax, which now stands at 15 percent for most people and would rise to 20 percent if the Bush tax cuts expire. He'd eliminate the federal estate tax, too. And Gingrich favors an optional flat tax that would allow taxpayers to pay a 15 percent rate, with a $12,000 personal deduction, if they prefer. That would undercut Texas Gov. Rick Perry's flat-tax plan, which would impose a 20 percent rate on people who choose it.

[See how a flat tax would (ahem) kill jobs.]

Cut corporate taxes. Gingrich wants to cut the corporate rate from 35 percent to 12.5 percent. That's at the low end of GOP proposals. Perry, for instance, would lower corporate taxes to 20 percent, Mitt Romney to 25 percent.

Balance the federal budget. Gingrich hasn't published a specific plan for paying down the national debt. But he favors a balanced-budget amendment and says he would solve the overall debt problem by enhancing economic growth, eliminating waste in the federal budget, slashing spending, and privatizing portions of the three big entitlement programs that account for 40 percent of federal spending: Medicare, Medicaid and Social Security. One topic Gingrich has been cagey on is cuts in defense—which accounts for about 20 percent of federal spending—such as those scheduled to begin automatically in 2013. He says it's vital to "revitalize" defense infrastructure, but hasn't detailed how.

[See 12 ways to thrive in a stagnant economy.]

Repeal Obamacare. Instead of Obama's plan, Gingrich favors a "patient power" program involving health savings accounts, which would be used to pay the premiums and deductibles associated with private insurance. Gingrich argues that the "third-party payment problem"—having government cover the cost of people's healthcare—raises costs because there's no incentive for people receiving care to economize. With patients making all the payment decisions, he says, costs for everybody would fall. He also favors other policies that would force more competition among insurance companies and healthcare providers. And he backs malpractice reform that would limit medical lawsuits.

Lower Medicare spending. Gingrich backs a "premium support" plan, such as Rep. Paul Ryan's, in which the government would pay part of the premium for insurance that seniors would buy on the private market. He'd also reduce benefits for wealthier seniors. That sort of plan would probably raise overall costs for many enrollees, but it would save trillions and prevent Medicare from bankrupting the government. Gingrich says he'd give seniors the choice of sticking with the existing program or opting for the benefits of a private plan. His main goal would be to give seniors stronger reasons to economize when they make healthcare decisions, as a way to lower overall costs.

Reform Medicaid. As with Medicare, Gingrich wants to see less government control and more "patient power" in this healthcare program for the poor. The government would provide funds to help needy patients pay for private insurance. States would have more control over who gets funding. In theory, this sort of Medicaid plan would generate more competition and push prices down, but it could also result in higher out-of-pocket costs for those now covered by Medicaid. As a safety net, the government would fund high-risk pools meant to cover needy patients who can't get private insurance at a reasonable price.

[See why a growing economy is leaving many behind.]

Create a private Social Security option. Gingrich would give workers the option to choose the current federal program or invest a similar amount of money (including the employer's contribution) into personal savings accounts that would be invested like a private retirement fund. Such PSAs would be diversified to reduce risk and would earn market rates of return. Workers could retire whenever they choose, and draw benefits in a variety of forms. And the government would guarantee to pay the difference if a PSA returned less than Social Security ordinarily would. As a model, Gingrich cites the Chilean retirement system.

Slash regulation. Gingrich wants to repeal the Dodd-Frank and Sarbanes-Oxley financial reforms, speed the Food and Drug Administration's approval process for high-priority drugs and technologies, and turn the Environmental Protection Agency into an "Environmental Solutions Agency" that would work more closely with businesses and local governments, to minimize red tape.

[See 5 good ideas from 4 GOP economic plans.]

Rely on business for new jobs. He shuns the idea that government can create jobs, relying instead on lower taxes, less regulation and a smaller public sector to stimulate economic growth and give businesses more reasons to spend and invest. For those who can't find jobs, Gingrich would link federal unemployment benefits to required job training.

Tap more domestic energy. Like most Republicans, Gingrich generally favors more oil and gas drilling, including an end to the ban on oil shale development in several western states. He'd also use federal royalties on drilling to fund research into cleaner sources of energy. With looser policies, Gingrich says, the United States could be the world's largest oil producer by 2017.

Rein in the Federal Reserve. Gingrich has suggested that he'd end the Fed's "dual mandate" of trying to keep both inflation and unemployment low, narrowing the Fed's mission to one of price stability alone. He'd also require the Fed to make public all of its decision documents and meeting records.

[See 10 ways the economy would change under Romney]

Lure more foreign visitors and workers. Gingrich wants to boost tourism by streamlining America's visa system, a move that could boost hospitality jobs. He also wants to ease restrictions for well-trained foreign workers and entrepreneurs who want to invest or build businesses in the United States. For companies that need unskilled migrant labor, Gingrich wants to develop a highly efficient guest-worker program—by outsourcing it to a firm experienced with electronic anti-fraud measures, such as Visa or American Express.

Twitter: @rickjnewman

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