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Well, I figured that title would catch your eye. I have worked pretty hard to not get political on this website, as that is not my main purpose. I have not even proposed suggested government actions, although I have from time to time talked about health and education policy.
Normally, before making any proposal, I would do a lot of research and then I would bounce it off my dozen or so smartest and most informed friends on that particular subject. At my age, I have a pretty awesome “network.”
But here I am going to shoot from the hip and take a big risk – hopefully I will hear back from you with comments – and write up the idea I had walking from the parking garage to the office this morning.
I don’t have to tell you that our President is in kind of a quandary about the economy. He wants to do the right thing but the nation is deeply divided on what that might be. Actually, the vast majority of people don’t have any idea what we should do.
Often the economy can only be healed with time and a gradual rise in optimism. But no matter how you feel about government being active in the economy, I think the odds are high that Washington will do something, whether you call it the second stimulus or not.
Politicians on both sides of the aisle seem to have a fundamental belief in the government’s ability to improve things by passing new laws and measures. So even though I might often disagree with even that premise, I know they probably will do something whether I am for it or not. Assuming that there will be “action,” let me suggest what that action might be.
If we are going to “spend” more billions anyway, why not:
Pull together the very best estimate of federal government tax revenue for the balance of 2009. Use conservative numbers if there are multiple scenarios. I am guessing the Congressional Budget Office or somewhere like that has the best numbers. Have a left-oriented think tank and a right-oriented think tank look at the numbers, or maybe even a small congressional committee, half R, half D. But do it quickly and come up with the best guess on government revenue for the rest of the year.
Then, starting March 1, reduce US payroll taxes by $100 billion in each month for the next six months. I am not sure whether it would be better to take it out of social security taxes or FICA withholding, but I think maybe social security taxes. Remember that ultimately all that money comes and goes from the same pool.
If you took out $100 billion a month from social security taxes, only those who have made less than about $100,000 would be helped, and half the money would go to the employee’s pocket and half would go to the employer’s pocket.
This $600 billion would come out of the total expected tax revenue proportionately. So if, for example, the expected social security taxes were $3 trillion, then the reduction would be an across-the-board 20%. I have not taken the time to look up the numbers, but it should not be that hard to figure it all out.
If half went into the pockets of workers and half to employers, that would almost certainly boost savings, spending, and job creation. Those who work for others and the employers and entrepreneurs who hire other people would both have more money.
A rough guess on the impact on you and me: if workers get half ($300 billion) of the total over six months, and there are say 200 million employed workers in the US, that’s $1500 each or $250 a month. Not much but a lot better than cash for clunkers or caulkers. The more workers in the family, the more you get.
I understand that the budget is deep in the red and all that, and it worries me as much as anyone. But after all the billions in corporate welfare to Wall Street and the auto industry, how about the rest of us?
The tax mechanism is already in place and it should not be impossible to figure the numbers, make the adjustments, and deliver the cash right into people’s hands fairly quickly. Maybe it might even do some good!
I invite your comments on this very controversial subject.
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Very interesting proposition and I see how it works in theory.
The only problem that I see is that the additional $250 a month people would get would not necessarily increase savings. I do, however, agree that it would increase consumer spending. With employers also getting money every month from this proposition, business saving coffers should go up. Luckily, if business savings go up, over time that may lead to expansion and more business growth.
On the flip side, that money the government is giving up takes away from something else. If we take money from something to apply to something else, something is inadvertently affected. What would that be, I have no idea but I can say something will feel that effect. That leaves one to think of how does this affect the amount of interest we pay on the debt we have as a country?
What is even more scary is not the current situation but what is going to come as a result of all this money printing?