Tax Refund Only Form of Politically Viable Stimulus in 2011
Posted by Michael A. Kamperman on October 30, 2010
The way to solve problems is to come up with creative solutions. Since Keynesean economics is off the table in Washington in 2011, then other ideas for federal economic aid will need to be implemented. The best form is not tax rate cuts, but flat tax refunds. The Treasury should spend one trillion dollars and mail every American who files a tax return a $3,000 check. For example a family of four would receive $12,000. Some will save the money and many will pay down debt, but many will also spend all or a portion of the money they receive. Current consumer spending will create jobs. Plus, those that save or pay down debt create the opportunity for greater spending levels in the future. It would be inflationary, but we need a little inflation right now. The core inflation rate in the preliminary third quarter GDP report is down to .6%. Deflation is less than 1% away. Since the Fed is about to print one trillion dollars anyway the tax-refund wouldn’t add directly to the debt. Lowering tax rates places most of the money in the hands of the wealthiest who are the least likely to spend it because they already earn more than they spend now. This form of stimulus would continue automatically every 6 months until the unemployment rate drops below an average of 8% for the trailing six months. Then it would be written into the statute that it automatically ends.
The idea can be sold as a bi-partisan compromise whereby everyone is a winner. It takes conservative principals and achieves liberal goals. It is certainly pro-business. Imagine being from a conservative district voting against a tax-cut refund, or from a liberal district voting against passing out checks to the poor and unemployed. While there might be more effective ways to spend one trillion dollars to boost the economy, none of them have a snowballs chance in hell of passing. This idea does. Considering we are in a debt-induced deflationary depression, then we can let those who fuss about heading down a moral slippery slope voluntarily return their checks to the Treasury. Those that think they don’t need the money and it should have been directed more wisely can donate the $3,000 to the charity of their choice.
The last thing the country needs after the pending 2010 mid-term wipeout of the should have focusing on jobs, jobs, jobs Democrats is for the President and Congress to engage in a two year war of grid-lock. That would be irresponsible and may a plague fall on both their houses. It would almost certainly ensure a third-party candidate emerges for the 2012 Presidential election. Such a candidate would be greeted by a voting public very much in a third party mood. Despite all the punditry the mood of the public is simple to diagnos. The official unemployment rate has remained in the 10% range and the true unemployment rate has remained in the 17% range for nearly two years. Five years ago any political analyst for the Republican or Democratic party given a hypothetical of one party control of Washington coupled with the highest unemployment rate since the Great Depression would have predicted the party in power would get wiped out in the next election. Hoover and the Republicans learned this lesson the hard way in 1932. As the saying goes, those that fail to learn from history are doomed to repeat it. Let’s pray everyone remembers history in 2011.
