I feel very lonely. The 25 year boom started under Ronald Reagan has come to an end due to shocking incompetence from government, risky bets, and an abundance of debt both public and private. Capitalism is under assault from the government as well as many “expert” economists. As bad as things look, a new boom is within reach if we take the right steps. Right now however, the Reagan boom model is the Alamo with only a few dedicated free market capitalists inside ready to fight to the last man. Armies of economists, politicians, corporate welfare lobbyists, and media personalities are descending upon the Alamo with the fury of Xerxes hoards. Joining me inside the last citadel of free market economics is Stephen Moore of the Wall Street Journal Editorial Board and James Pethokoukis of US News and World Reports. I have watched both men fight valiantly on television against an endless onslaught of command and control economists, as well as supply side thinkers who have crossed over to the other side for a short hiatus.
For the moment let us assume that the government needs to do something to help our economy. I know my libertarian/conservative leaning friends are keeling over, but lets set the explosive issue of nothing vs. something aside for a moment because the fact is, SOMETHING is coming. Our newly elected President and Congress are incapable of doing nothing. So since something is inevitably going to be done at the government level, we must now debate what should be done. The current plan will be changed considerably but the overall message is this, SPEND. Where they will get it is anyone’s guess since the government has no money to spend. To get the money they can tax us, borrow from us and foreigners, or print it. Each of these choices have severe consequences though. These choices will slow growth, hurt our budgets for years to come with skyrocketing interest payments on debt, and/or cause massive inflation. They want to spend in the neighborhood of $775 billion – $1.3 trillion (maybe more). This will mostly be spent on various infrastructure projects and token tax cuts that really aren’t tax cuts at all but rebates and credits that you may or may not qualify for. Even the supporters of the plan cannot explain how it will stimulate the economy quickly and make a real difference. This sounds bad doesn’t it?
Have no fear, I have a solution that is far better then what Congress or the President elect are discussing. Federal Income tax receipts for 12 months total approximately $1.1 trillion. This means that if we institute a federal income tax holiday for 12 months, $1.1 trillion worth of stimulus will be injected into our economy. These numbers are easily adjustable depending on the length of time and size of stimulus you want. Think about the difference here. Instead of waiting months or even years for infrastructure projects, Americans will be getting instant stimulus with no worry that the money will be wasted by government bureaucrats doling out no bid contracts. Inevitably, some of this money will be spent and some of it will be saved. In fact, we need both. We have spent too much over the years and need some saving, but we all know if no one spends then the economy is in deep trouble. This plan also has another huge benefit that the Obama/Congress plan does not. My plan doesn’t just give an incentive to consume, but also advocates production. When taxpayers know that their work will benefit them more, they will want to work more and take advantage of the great opportunity to earn money federal income tax free! Americans will do whatever they can to work as much as they can since their take home pay will be so much higher. Production is how we can get out of this mess, not reckless spending.
Of course this is not a long term solution, but if the government is intent on spending money they don’t have and borrowing it or printing it to pay for it, why not do it the most efficient way possible where we get the biggest bang for our trillions of bucks? Restoring long term health to the economy will require real tax cuts coupled with massive spending cuts, a strong dollar, and the reform of our massive entitlement programs, but those battles will be fought after we defend the Alamo of Reagan capitalism.
Tags: Economy, Government, Obama, Taxes