[StBernard] Thinking Anew and Acting Anew: A People's Bailout Or A Politicians' Bailout?

[Westley Annis]

Thinking Anew and Acting Anew: A People's Bailout Or A Politicians' Bailout?

by Newt Gingrich (more by this author)
Posted 12/02/2008 ET
Updated 12/02/2008 ET


America is about to enter the post-Bush era.  Two recent events -- the
terrorist attack in Mumbai and the collapse of CitiBank -- are vivid
warnings about the complex, uncertain and potentially very dangerous time we
are about to enter.

In the New York Times last week, columnist Tom Friedman made the following
stunning point:

I spent Sunday afternoon brooding over a great piece of Times reporting by
Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn't the right
word. The front-page article, entitled "Citigroup Pays for a Rush to Risk,"
actually left me totally disgusted. 

"Why? Because in searing detail it exposed -- using Citigroup as Exhibit A
-- how some of our country's best-paid bankers were overrated dopes who had
no idea what they were selling, or greedy cynics who did know and turned a
blind eye. But it wasn't only the bankers. This financial meltdown involved
a broad national breakdown in personal responsibility, government regulation
and financial ethics.

The Pelosi-Paulson Model of Crony Capitalism, Predatory Politicians and
Micromanaging Bureaucrats

It is vital that every American understand the implications of Friedman's
last sentence. "The financial meltdown involved a broad breakdown in
personal responsibility, government regulation and financial ethics."

Righting such a systemic wrong requires far more than the Pelosi-Paulson
model of crony capitalism, predatory politicians and micromanaging
bureaucrats. In fact, in the face of the scale of collapse Friedman is
describing, throwing trillions of the American peoples' dollars into a
cynical, corrupt, unethical system is exactly the wrong thing to be doing.

And the scale of the problem we face in the financial world is matched by
the scale of the challenges we face in the national security world.

Both these challenges require new thinking.

"As Our Case is New We Must Act Anew and Think Anew"

I often quote President Abraham Lincoln at times like this because he
captured the challenge so perfectly in his annual address to Congress on
December 1, 1862:

"The dogmas of the quiet past are inadequate to the stormy present and the
occasional is piled high with difficulties, and we must rise to the
occasion.  As our case is new we must act anew and think anew.  We must
disenthrall ourselves and then we shall save our country."

Lincoln's call to think anew and act anew is especially important today
because of the establishment nature of the team President-elect Obama is
gathering. I write this with admiration and not with criticism.

The Danger of Looking to the Past in Times of Dramatic Change

President-elect Obama has done a good job of assembling sophisticated and
highly respected teams for both national security and economic-financial
policy.

Yet these two events -- Mumbai and CitiBank -- should remind us that
knowledge about past systems and confident expectations based on past rules
can actually be a detriment in dealing with periods of dramatic change.
Peter Drucker wrote brilliantly about this problem in The Age of
Discontinuities.  Drucker argued that one can be an expert on the period
before the discontinuity and one can learn to be an expert on the new period
emerging after the discontinuity but during the discontinuity itself there
is a real danger of past knowledge becoming very misleading.

Drucker's argument is illustrated expertly in David Halberstam's study of
Vietnam War policy making in Washington, The Best and the Brightest.  The
new team being assembled by President-elect Obama would do well to heed its
lessons.

A New Team of "Whiz Kids" In Washington DC?

Halberstam argues that it was precisely the confidence and the certainty of
the team of "whiz kids" President Kennedy assembled which led them to make
assumptions that proved to be false and to reject fact-based information
which conflicted with their previous theories of how the world should work.
They rushed into policies in Vietnam confident that what Halberstam called
their "brilliant policies that defied common sense" would enable them to
impose their will on reality.  But with agony they learned that a harsh and
unyielding reality was imposing its price in blood and treasure on America.

The new Obama teams for national security, finance, and the economy should
ponder deeply the lessons of Drucker and Halberstam and question whether the
theories and principles they are bringing into office are in fact the right
solutions for today. 

Mumbai and Citibank should be sufficient proof that the election of a new
president has not changed any of the fundamental challenges facing America
and threatening the civilized world.

How Much Damage Could a Mumbai-Style Attack Do To An American City?

The terrorist assault on Mumbai is a profound reminder that the world
remains dangerous and there are many terrorists dedicated to destroying
liberty and the rule of law as we know it.

For America, the scale and coordination of the Mumbai attack are a grim
warning that our Homeland Security preparations are almost certainly
inadequate.

If the Department of Homeland Security were to run a series of exercises in
the first six months of 2009 replicating the Mumbai attack in cities like
Boston, Charleston, Baltimore, Savannah, New Orleans, Houston, Long Beach,
San Francisco and Seattle, it would be shocked to discover how much damage a
ship-based assault team using simple weapons could inflict on an American
city.

Pragmatic Decision Making Versus Institutional Reform

And if the Department of Homeland Security had the courage to go a step
further and run tests involving simulated nuclear and biological weapons,
the results would be so horrifying Americans would demand a crash program of
preparedness beyond anything the current authorities can imagine.

The new Obama national security team is competent and professional and he is
to be commended for his courage in recruiting Senator Clinton, Secretary
Gates, and General Jim Jones. These three nominees are intelligent, tough
minded, and hard working.

The greatest danger they will face is in their own belief that hard work and
methodical pragmatic decision making can substitute for strategic planning
and institutional reform.

America's Immediate National Security Threats: 

The fact is Mumbai is a grim reminder that more than seven years after the
attack of 9/11 the United States and its allies have no solutions to the
most difficult problems of terrorism on the planet.  

.    The Saudis are still shipping money overseas to recruit for the most
militant wing of Islam.
.    The Iranians are still trying to develop nuclear weapons so they can
dominate the Persian Gulf and eliminate Israel from the face of the Earth.
.    Pakistan has more nuclear weapons and is more unstable today than it
was in 2001. 
.    The Taliban and its Pashtun allies in Northwestern Pakistan are as
entrenched as they were in 2002 and are regaining strength in Afghanistan.
.    The erosion of Western rule of law under the onslaught of internal
Islamic demands is continuing to spread through Great Britain, Holland, and
other countries.

America's Long-Term National Security Needs
                                     
The long-term challenge of China as an economic, scientific and
technological competitor requires a national security based assessment of
the requirements for change in America. If we are to remain the leading
power in the world 25 years from now we have to reform litigation, taxation,
regulation, education, health, energy, and infrastructure. The scale of
change needed is greater than the New Deal but in a fundamentally different
direction.

As Tom Friedman has written in other columns and in several best selling
books, the United States needs an extraordinary level of achievement to
remain the most productive and most creative country in the world.  And our
national security leadership depends on precisely those characteristics as
well.

Out:  Republican and Democrat.  In:  Honesty, Productivity, Creativity,
Effectiveness

The key words describing the kind of reform that will solve our economic and
national security challenges in the next decade will not be liberal or
conservative, Republican or Democrat.

They will be:       

.    Honesty
.    Productivity
.    Creativity
.    Effectiveness

Next week I will focus on these four words and what they will mean for
public policy in 2009.

Why Would You Give One More Dime of Your Taxpayer Money to a Company That
Paid $400 Million to Name the New York Mets' New Baseball Stadium "Citi
Field"?

But for now, it's worth stating what should be obvious:  The Pelosi-Paulson
centralized government, politician defined, bureaucratically implemented
bailout system fails to meet the test of any of these four words of reform.
It will not lead to more honesty, productivity, creativity or effectiveness.

Remember the reason for Tom Friedman's disgust over the article about
Citigroup:  "Because in searing detail it exposed -- using Citigroup as
Exhibit A -- how some of our country's best-paid bankers were overrated
dopes who had no idea what they were selling, or greedy cynics who did know
and turned a blind eye."

Why would you vote for another $350 billion to go to people and institutions
which fit that condemnation?  Why would you give one more dime of your
taxpayer money to a company that paid $400 million to name the New York
Mets' new baseball stadium "Citi Field"?

A Politicans' Stimulus Package or a People's Stimulus Package?

It's the very bankruptcy of the current establishment which makes
Congressman Louie Gohmert's (R-TX) tax holiday proposal so intriguing.

Congressman Gohmert has calculated that the amount Speaker Pelosi and
Secretary Paulson will be advocating for the second installment of the
bailout -- $350 billion -- is more than the amount needed to allow every
American to have a two month tax holiday from both the FICA (Social Security
and Medicare) and income tax.

Let me repeat that:  What Pelosi and Paulson are proposing to pour into
crony capitalism is more than what it would cost to give every American
taxpayer a total federal tax holiday for two months.

Which do you think would do more to get America growing again? $350 billion
to failing managements, "overrated dopes" and "greedy cynics" or allowing
every American to simply keep all their money for January and February?

The Money You Will Keep?  Your Monthly Income Multiplied by .66

For the working poor a FICA tax holiday (the $350 billion Paulson was going
to send to Wall Street would simply be used to cover the revenue losses in
the Treasury so Social Security and Medicare would not lose a penny) will be
a dramatic increase in take home pay.  This one act will save more homes
from bankruptcy than any centralized government bureaucratic red tape ridden
system.

If you want to figure out how much Rep. Gohmert's tax holiday would save
you, Jed Babbin of Human Events has this advice:

Most Americans pay about 25 percent of their income in federal income tax
and another 7.25 percent in FICA (Social Security and Medicare taxes).
Computing how much money Gohmert's tax holiday would leave in your family's
checkbook is very simple.

Take your monthly income (the gross amount shown on your pay stubs before
tax and any other withholding) and multiply it by 0.66. That amount is
roughly what Gohmert's two-month tax holiday will leave in your pocket.

If a Two Month Tax Holiday Sounds Good, Why Not Six Months?

But there's more.

Speaker Pelosi's desire for an additional $700 billion Washington centered,
government stimulus program would actually create the opportunity to offer
an additional four months of FICA and income tax holiday for the American
people.

If the American people knew they were going to have no personal federal
taxes until July, 2009 how much debt could they pay down? How many mortgages
would be saved? How many college tuitions could they pay? How much could
they invest to rebuild their retirement accounts?

This is an example of what President Lincoln meant by "thinking anew."

Send me a note at Newt at newt.org letting me know what you think of the tax
holiday idea. 

And if you like the idea of not paying federal taxes until July, 2009,
please send this newsletter on to your friends and encourage them to speak
out on these new solutions.
       
And remember, coming next week: The four key words to getting America moving
again and how to apply them to federal, state, and local government.

Your friend,
Newt Gingrich