Monday, February 16, 2015

Lincoln Day Essay by Joseph Cieslewicz, 11th Grade

 “Utah is widely regarded as one of the best managed states in America. What impact have Republican principles had on the success of our state? How can the Utah model help address the challenges facing America?”

Joseph Cieslewicz, 11th Grade. 

Fiscal responsibility has always been an integral American value. President William McKinkley declared in 1896 that “The income of the government, I repeat, should equal its necessary and proper expenditures. A failure to pursue this policy has compelled the government to borrow money in a time of peace, to sustain its credit and pay its daily expenses. This policy should be reversed, and that, too, as speedily as possible.”[1] These Republican principles are even more relevant today, though they are increasingly disregarded. Guided by similar principles, the State of Utah has developed sound fiscal policies and built a healthy business environment. Properly applied, this model can help address many of America’s economic and governmental problems.

            The first important factor in Utah’s success is fiscal responsibility. In Utah, both the governor and the legislature are legally required to balance the budget every year.[2] Utah’s commitment to this principle has allowed it to escape the massive deficits faced by other states during the last economic downturn. A balanced budget also ensures that the state will maintain manageable debt levels. Consequently, Utah is one of only 7 states with an “AAA” credit rating.[3] Utah has built its fiscal policy on the basic principle that one should not spend more than one earns.

Edmund Burke, the father of conservatism, believed that “Society is a contract between the past, the present and those yet unborn.”[4] Utah’s state government upholds their end of this contract by ensuring that future generations will not be saddled with debt. Careful borrowing protects the state from a vicious cycle of debt, whereby the government must borrow more and more money just to pay the interest on its loans. This cycle has brought many national governments to the brink of default.[5]

            Utah also practices Republican fiscal principles through its tax policies. The Republican Party opposes the federal system of progressive taxation because “We oppose any tax policies that divide Americans or promote class warfare.” They advocate a tax system that is “simple, transparent, flatter, and fair.”[6] Utah applies these principles with a single income tax rate of 5%. The Tax Foundation praised Utah’s tax climate for levying taxes with low rates on broad bases.[7]  This ensures that all groups of society share equally in the burdens of government. A broad, flat tax also motivates all groups in society to be concerned about taxation and government finances. When a tax system allows some groups to pay no taxes at all, it encourages many to think that they can take from society without giving anything in return. Furthermore, a proportional taxation system has no negative incentives for earning more income, thereby encouraging individual enterprise.

            This combination of a balanced budget and fair, simple taxation could solve many of the federal government’s fiscal problems. Previous attempts to require the federal government to balance its budget, such as the Balanced Budget Act of 1997, have failed because they lacked real, long-term legal authority. Only a Balanced Budget Amendment to the US Constitution will restore long-term fiscal responsibility.[8] This will force lawmakers to honestly evaluate the necessity of each federal program. Programs determined to be less critical will be streamlined or cut. This must be combined with an overhaul of the US Tax Code, to make federal income taxes simpler and more proportional.

            The second factor in Utah’s economic success is a healthy regulatory environment. Utah’s approach to business regulations was best explained by Governor Gary Herbert: “Government should get off of your backs and out of your wallets.”[9] In that spirit, Utah maintains a low corporate income tax rate of 5%. Utah goes even further in supporting businesses with massive corporate tax incentive programs.

Regarding business regulations, Republican President Theodore Roosevelt warned that “The mechanism of modern business is so delicate that extreme care must be taken not to interfere with it in a spirit of rashness or ignorance.”[10] In keeping with these principles, Utah’s business regulations are under constant review in order to create the most opportunities for businesses, while still safely monitoring externalities. Utah’s health insurance regulations provide an excellent example of this healthy regulatory climate. Jason Sorens, Professor of Political Science at Dartmouth, points out that “Utah’s health insurance regulations are generally light, resulting in less costly policies and more choice for people in the small group and individual markets.”[11] This offers a stark contrast to the increasingly complex and restrictive insurance regulations coming out of Washington. Another important source of economic freedom in Utah is Utah’s right-to-work policy. This protects the economic liberty of both workers and businesses.

            Utah’s support of business is based on the principles of the Republican Party. From its earliest days, the Republican Party has advocated policies that provide opportunities to both businesses and workers. Opportunities for businesses are opportunities for employment, and thus the interests of employers and employees are linked. Republicans understand that it is businesses, not the government, which drive the US economy. They champion job creation as the best way to help citizens help themselves. Conservative thinker Russell Kirk explained why Conservatives defend economic freedom: “To be able to retain the fruits of one’s labor; to be able to see one’s work made permanent; to be able to bequeath one’s property to one’s posterity—these are advantages difficult to deny.”[12] Government economic policies should have the end goal of making citizens self-reliant, not dependent.

            If we are to rebuild America’s economic greatness, we must help our businesses be competitive in the global economy. As former Utah Governor Jon Huntsman put it, “Economic recovery must be earned. And it will be earned by entrepreneurs and small businesses.”[13] Utah’s workforce is already well-educated and multilingual, prepared to compete in the global economy. The state’s support of economic freedom protects the job opportunities that would naturally come to such a workforce. The result is greater prosperity for all. Utah has doubled its international trade over the last 5 years, enjoys the second fastest growing economy in the nation, and boasts an unemployment rate of 3.5%.[14]

            On the national level, many reforms can be implemented to follow Utah’s lead and give more freedom and opportunity to American businesses. The United States currently has the highest corporate tax rate in the world, at 40%.[15] This is devastating to everyday Americans because, as Ronald Reagan put it, “Business must pass its costs of operations -- and that includes taxes -- on to the customer in the price of the product. Only people pay taxes, all the taxes.”[16] High corporate taxes have also driven many American jobs overseas. The federal government should follow Utah’s lead by lowering the corporate tax rate, at least to a level on par with that of other developed nations. Lowering the tax rate will encourage corporations that have moved overseas to utilize the American workforce. 

             Utah’s economic structure is built upon enduring values of self-reliance, innovation, fiscal responsibility, and economic liberty. Utah has applied Republican principles in building this system which is not only economically healthy, but also morally sound. Utah’s economic success is built on individual enterprise, not government intrusion. These values, and their correlating policies, would help America resolve many of its governmental and economic challenges. Like all reforms, this cause must be advanced by the American people. American citizens must live in accordance with these principles and elect officials who are committed to these reforms. These efforts will bring rich rewards to Americans and their posterity. As George Washington proclaimed, “A people who are possessed of the spirit of commerce, who see, and who will pursue their advantages, may achieve almost anything.”[17]



[1] William McKinley, “1896 Acceptance Speech,” http://projects.vassar.edu/1896/mckinleyaddress.html.
[2] National Association of State Budget Officers, “Budget Processes in the States,” http://www.nasbo.org/sites/default/files/BP_2008.pdf.
[3] Kurt Badenhausen, “Utah Tops Forbes 2012 List Of The Best States For Business,” Forbes, http://www.forbes.com/sites/kurtbadenhausen/2012/12/12/utah-tops-list-of-the-best-states-for-business/.
[4] Edmund Burke, Reflections on the Revolution in France, http://www.econlib.org/library/LFBooks/Burke/brkSWv2c0.html.
[5] See Peter Eavis, “For Europe, Few Options in a Vicious Cycle of Debt,” The New York Times, 11 January 2012. http://dealbook.nytimes.com/2012/01/11/for-europe-few-options-in-a-vicious-cycle-of-debt/.
[7] The Tax Foundation, “2015 State Business Tax Index.” http://taxfoundation.org/article/2015-state-business-tax-climate-index.
[8] David Primo, Senior Scholar at George Mason University's Mercatus Center, “Act Now to Prevent a Debt Crisis,” US News, http://www.usnews.com/debate-club/does-the-united-states-need-a-balanced-budget-amendment/act-now-to-prevent-a-debt-crisis.
[9] Kurt Badenhausen, “Utah Tops Forbes 2012 List Of The Best States For Business,” Forbes, http://www.forbes.com/sites/kurtbadenhausen/2012/12/12/utah-tops-list-of-the-best-states-for-business/.
[11] The Mercatus Center, Freedom in the 50 States, http://freedominthe50states.org/.
[14] “2014 Business Facilities Rankings Report,” Business Faculties Magazine, http://businessfacilities.com/2014/08/2014-business-facilities-rankings-report/; “Utah Unemployment Report,” https://jobs.utah.gov/wi/pubs/une/.
[16] Ronald Reagan, “Address to the Nation on the Economy,” http://www.reagan.utexas.edu/archives/speeches/1981/20581c.htm.  
[17] George Washington, Letter to Benjamin Harrison, 10 October 1784, http://teachingamericanhistory.org/library/document/letter-to-benjamin-harrison-3/

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