Is it finally time for a real stimulus bill
Aug 27th, 2009 by David Anderson
After the fiasco in February, the term stimulus bill is a dirty word. Yet, the recent CBO projections sustained high unemployment and larger deficits makes me think that a proper stimulus bill would be an investment. The projected deficit is up by two million million (trillion) dollars before new programs are taken into account because of poor economic performance. The real unemployment rate is said to be 16%. Instead of speaking about raising energy taxes to pay for global warming concerns, income taxes to pay for health reform, income taxes on the wealthy to pay for whatever, payroll taxes on workers to pay for health reform, and business taxes to pay for an aggressive retread liberal agenda, why not first go for economic stimulus?
I want real economic stimulus not the sham of Christmas, Hanukkah, Kwanzaa, and every Special interest lobbyist birthday rolled into one bill. We know what works. Why don’t we do it?
First let’s stop holding up the oil drilling permits authorized under the Bush Administration and mandated by Congress. It will help create downward pressure on future oil prices and create well paying jobs. It will actually bring money into the government instead of spending money.
Let’s do the same for wind farms. While we are at it, let’s create energy enterprise zones where the manufacture of alternative energy qualifies for investment tax credits. Let’s give a huge reward for the better battery.
Second, Let’s continue the payroll tax credit for another year and make it for both the employee and the employer so that the cost of employment is cheaper.
Third, let’s try cash for appliances without the bureaucracy. Energy efficient appliances would help lower energy prices and stimulate the economy. The Cash for Clunkers program was a great idea to move people to more energy efficient cars, but it was very poor in execution. I would love to see the program done again, but if it is announced too early that would depress car purchases. It is best to let it go.
Fourth, ask the Fed to stop the payment of interest on excess reserves. It is stopping the free flow of money and dampening the vaunted multiplier effect.
Fifth, Just eliminate the income tax, payroll tax, and corporate income tax and implement the FAIR Tax. I know that won’t happen with this Congress. In spite of scores of economists saying it would be the best move possible.
Sixth, barring number 5, reinstate the Reagan era investment tax credit and give small and medium business accelerated depreciation options.
Seventh, Make December of 2009 a tax holiday from personal income and payroll taxes.
Eighth, Give huge prizes for the creation of the Better energy storage system, increasing the efficiency of solar panels to 18%, a more energy efficient way to extract shale oil, and a better nuclear waste recycling system.
Ninth, Extend the first time homebuyers tax credit for 5 years.
Tenth, exempt the first 2% of an interest rate in bonds or CD’s from income taxes.
Eleventh, Declare any county with unemployment and underemployment over 10% an enterprise zone where local businesses that expand will get a 5 year investment tax credit in addition to the general one proposed.
Finally, Break the foreclosure cycle by funding state programs that help people by loaning them money interest free to catch up on mortgage payments once they find a new job. Give the banks more incentive to negotiate by reforming the bankruptcy laws to what they were before Jimmy Carter exempted mortgage terms from being changed. Give the banks tax credits to make up for loses in the voluntary modifications.
These proposals would cost a lot less than anything discussed and could in fact be done with the 250 billion set aside for bank relief that the President is thinking of relinquishing. If you want sustained economic growth, you have to build a supply side strategy into the mix. The current stimulus is based solely on the demand side. You have to do both. It is like trying to fly flapping one wing.
David, you already got your supply side tax cuts. You can check that off your list.
Even if some taxes are raised slightly they are still in the range that has traditionally been considered stimulatory by supply siders.
Supply side tax cuts can help when taxes are too high. But when taxes are too low they are destructive. That is what we saw with the Bush tax cuts.
I actually like the idea of reducing corporate taxes while increasing personal income taxes. That would stimulate business while also capturing some revenue to help the deficit.
Not necessarily raising the top rate, but modestly increasing capital gains and dividend taxes. Investment taxes are too low and are incentivizing business into short-term thinking, get-rich-quick schemes for operators who move on and never invest in the business and job creation.
You misunderstand the nature of supply side economics. The supply side has everything to do with encouraging the formation of capital and the means of production. What savings oriented or American business oriented tax cuts have we had?
Supply side economics is a lot more than just the Laffer curve.
Oh for crying out loud – you guys were in charge all that time and now you tell me they were the wrong tax cuts?
The cut in capital gains (from 20% to 15%) and the cut in dividend income (cut to 15%; was treated as regular income with top marginal rate 39%).
If you think corporate taxes should be cut, sure, why not. Just make up the difference with PIT on the capital gains and dividends.
Tax simplication is more important than tax cuts, businesses should worship customers not the IRS. Moms and Dads should take care of their families not the whims of the IRS.
http://www.youtube.com/watch?v=Evmu5MdOTs0&eurl=http%3A%2F%2Fdelawarerepublican.wordpress.com%2Fdrtv%2F&feature=player_embedded
Mike Protack
[...] Now look at a few things that might actually stimulate the economy. A REAL Stimulus Package [...]
The feds give DeMoines $1 million to study pansies. And similar ‘stimulus’ idiocy is extant in all fifty states. Why? This is a function of government? No tax scheme can possibly solve anything when the goverment gets involved with everything. Eventually, investment capital will flee.
Except that our competitors are doing it as well. That is the saving grace which keeps us from running this country into the ground. We are off track but so is most of the world. If we get back on, we can leave them in the dust.
You are 100% correct. The government has to stick to its purpose or else it misallocates resources. Individuals have the right to do that based upon their free choices. It is called the market.