The Economic anti-stimulus Package

by Sal on January 24, 2008

in Politics

President Bush and Congress are close to a deal on a $150 billion economic “stimulus” package.  The package includes a temporary suspension of the 10% income bracket, meaning that everyone who fell in this bracket would receive up to $800 ($1200 for married couples) in the form of a rebate.  In addition, the plan would include business tax write-offs, business investment write-offs, and plans for rescuing those who being foreclosed on by allowing Fannie Mae and and Freddy Mac to purchase mortgages that are greater than the current $450,000.00 cap (those poor people who really couldn’t afford their $600,000 houses). 

This plan is nothing but a show and will do very little to stimulate the economy.  It will provide a short-term boost in consumer spending and saving, but will not do anything long-term to stabilize and grow the economy.  The economy, and Wall Street in particular, is based on future long-term projections.  The best way to grow the economy is to provide long-term, permanent solutions.  While I don’t particularly object to the tax rebates (I never mind when the government gives me back some of my money) or the write-offs, they are minor, temporary, and probably low-impact changes.  Below are a few ideas on how to really grow the economy: 

  • Make Bush Tax Cuts permanent:  Due to the sunset provision in the Bush tax cuts, there will be an automatic tax increase in 2010 for all Americans, the re-invention of the Marriage penalty, the complete reversal of the cut in the death tax, and numerous other increases.  These tax cuts were in a large way responsible for the sustained economic growth of the past 5 years.  Making them permanent would be a good first step in assuring long-term growth. 
  • Corporate Income Tax Cut or elimination:   This is one proposal that would surge the economy, create more jobs, and make America more competitive in the global marketplace.  One of the reasons that countries such as India and China are so attractive to businesses is the low or non-existent corporate income tax.  Cutting this tax would provide for further investment, more jobs, and a surge in wall street. 
  • Capital Gains Tax Cut or elimination:  This cut would surge investment in Wall Street.  A cut in capital gains makes investing more profitable, and would stimulate investors to buy. 
  • Further Income Tax Cuts / Simplification:  Cutting the income tax rates further, or even more daring, going to a low-rate flat tax or national sales tax would provide a boost in the economy.  The major expansions of the last 30 years have all included personal income tax cuts which have given people more of their money to spend, save, invest, and start their own businesses. 
  • Social Security:  This may not seem obvious, but allowing people to invest their payroll taxes into private accounts in the market would in effect take billions from the buerocratic sink-hole that is Washington, and move it into investments in American Business. 

Any of these proposals would not only stimulate us out of the current market correction, but also put us on a track for unprecedented economic growth and make us more competitive in the world market.  America has to discard its socialist tendencies that started with the New Deal, massively expanded with the “War on Poverty”, and continues today with the current crop of Democrats.  President Bush is doing this country a disservice by abandoning the economic principles he once adhered to, and pushing this anti-stimulus package. 

There has been much talk of elections and the current Republican field.  While there are numerous problems in other areas, as Mike has indicated in his previous post, most of the Republican candidates would provide a better economic leadership than any of the Democrats (Mitt and Rudy in particular).  Hopefully whoever the next Republican president is can work to enact economic policies that will grow the economy the way that the Reagan policies of the 80s, the Gingrich policies of the 90s, and the Bush policies of this decade have led us to sustained economic growth, with fairly mild corrections/recessions in between. 

{ 1 comment… read it below or add one }

Daniel Steel January 25, 2008 at 4:07 am

Your suggestions probably won’t work well. Most of that capital will simply flow out of America and be invested elsewhere. It would work if we had a closed market and the capital was invested in our workforce, but it won’t be. In many ways the reason we are in this mess is because all capital flows out of America without it being invested here. With that capital outflow is workforce knowledge and technology.

Until the value of our labor balances with China and India we will be headed for a recession. Supply and demand will force the gap to close between labor costs. So basically, the American people have to take a pay cut. Instead our leaders want more tax breaks and such for the wealthy. They also want Americans to spend money they don’t have to fund globalization. That is why the Fed is lowering interest rates but I have no idea who they have left for the banks to loan too. Any big business will simply cut and run for greener shores.

- Americans take a pay cut to balance with global labor OR
- The main tariff, which is dollar, must balance our labor costs through inflation.
- Allow soverign wealth funds from China, India and everywhere to buy American assets.
- Introduce silver/gold/copper money into circulation.
- Allow the market itself to set interest rates instead of the Fed – long term.
- Honestly deal with the “credit default swap” problem, which appears to act as a bet against something and isn’t investing value but gambling.


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