Recently we added a new target for stimulation, newspapers, yup in Pennsylvania they are talking about a bailout for a newspaper company. Now unless it is the Star or Inquirer or some other socially acceptable high minded publication, I say forget it.
With not one Republican voting for the so called stimulus package in its current form, the Democrats are in a good position to blame them for the lack of stimulation. Listening to Pelosi and Harry is sufficient stimulation for me, I get so stimulated I forget how many glasses of wine I have had watching the evening news and then I forget why I was so stimulated in the first place.
So here is the deal and you may want to write this down. The US debt and growing deficit is a big deal and sooner or later the bill will come due (and you will pay it). That simply means that taxes will have to go way up and interest rates with them. Keep in mind who we are indebted to. That would be China, India, Russia and Middle Eastern counties, as you may have noticed; those folks are not exactly our closets friends. Think political leverage (after a few glasses of wine). Then think who our Secretary of State is these days, but that’s another story. On the other hand, we may be able to divert contributions to the Clinton library into Treasure Bonds, but I digress.
Then you have the fact that those foreign governments have their own problems, so the question becomes what if there is no one who can or who wants to buy our debt? That my friend is a downright threat to our way of life, our solvency¦serious stuff indeed.
So now do you think that willy-nilly spending in the guise of a stimulus to the economy is a good idea? There is no such thing as a short term solution that does not have long term consequences and in this case the stakes are very high.
That would lead us to the idea that while we do indeed have little choice except to spend to get back on track, how is the best way to spend the money. Right now we are increasing entitlements that will never go away and will add to future debt and government dependence (which some cynics believe is intentionally), we are spending on infrastructure that will take 18 months or more to kick in with new jobs and in any case as the economy improves would pick up on its own. We are sending money to the various states which are notorious for mismanaging money, making unaffordable promises and being even more in bed than Congress with special interests, especially, teachers and other public unions. Oh the stories I could tell you.
Let’s think about this. First, we do need to stimulate the economy, we do need to get money into peoples hands as quickly as possible so they spend money (and thhereby increase sales tax revenue, create demand and thus stem the falling number of employed), we do need a long term strategy to pay off our debt and start living within our means. Given it unlikely that Visa or MasterCard will give the federal government a good FICA score, we need an alternative strategy.
And, oh yes, there is the small matter of those pesky other obligations we have entitled ourselves to like Social Security and Medicare.
How would you do all this and still keep control over future spending and revenue and be able to quickly make adjustment as needed?
Here is a thought, you would target tax cuts in a precise manner that will stimulate the economy in the short term, will encourage investment and help those who most need it. Then as things start to pick up it is merely a matter of gradually targeting the tax increases that will surely be necessary in the years ahead and you have not in the process, increased entitlements that will add to the future coming debacle. You also have the ability to intelligently make decisions on exactly what new programs you can afford. Today we are spreading the cash around to anyone who hollers, help, “I am the victim of the economy¦me too and perhaps you too so why don’t we help you¦directly.
What kind of taxes to target? Let’s see this is like looking at the menu of a Jersey diner there are so many choices. Let’s start with payroll taxes, with sales tax, income tax, and then move to use the tax code to encourage business investment, lower the corporate tax rate, change how offshore earnings are taxed. Nothing new here of course, but what is new is that it is all visible and controllable and the direct beneficiaries are not some government agency trying to spend the money, but each and every American and each and every business person. And the tax changes are not buried in 7000 pages of legislation otherwise known affectionately as pork.
No, this does not solve our long term problems; it will still take many months to solve the problems of our economy, perhaps years. But what this does is keep the spending visible and easily reversible and that’s the key.
In the rush to solve our current problems through spending, we are creating massive new problems, and those may not be solvable¦unless you happen to have a few trillion in the bank you would care to invest in US Treasury and Savings bonds.
What you want to make clear to your elected representatives is that you will not accept actions today that will hurt tomorrow when those who you have elected are long gone into lucrative jobs as lobbyist or making a small fortune on the speaking circuit¦and overlooking their own tax obligations. :yh_rotfl
