Let's Start Playing Offense
Are our elected and appointed officials doing what's necessary to reinvigorate the economy? Here we are, months into an economic firestorm of historic proportions, and we're still picking through the rubble rather than getting on with the business of rebuilding the house. Sure, most can agree that we had to address the unraveling of the financial system due to the fallout from a bursted housing bubble. The Treasury and Fed have managed, albeit clumsily, to triage the system such that death is no longer imminent. Nevertheless, the patient remains critically ill. The medicine is available, but the doctor won't prescribe it.
The medicine is massive individual and corporate tax incentives. Forget about the preposterous Keynesian-style stimulus that has proven time and time again to be stimulative to nothing but the deficit. Marginal tax rates for individuals and corporations must be reduced substantially. Productive activity is kindled when the rate on the next dollar of income is lowered. That is the fuel for entrepreneurship and investment. Simply handing out money directly or through tax credits does little or nothing to permanently enhance the productive capacity of our economic system. It's a catalyst for short-term spending (and saving), not for long-term, sustainable growth.
There's talk of passing a stimulus package of unprecedented size, targeted primarily at infrastructure (including Green infrastructure), when the new administration takes office. Given the choice of that type of stimulus and the one we had in February ($600 and $1,200 checks), the infrastructure-oriented one is clearly better. But, why focus on such a limited area when the problem is of such broad scale? Through tax policy, we can unleash the productive capacity of all businesses and all individuals, rather than just those industries who are targeted for Federal funds. Doesn't that make a lot more sense? No matter how many hundreds of billions of dollars the government allocates, it can never represent more than a small fraction of what the entire business and consumer communities are capable of. Additionally, tax policy doesn't require direct government outlays and all of the associated negative residue.
Let's get much more proactive and incent the trillions of dollars that are on the sidelines to be put to productive use. Consumer and business confidence will increase markedly, and we will start creating jobs again instead of hemorrhaging them by the hundreds of thousands.
The medicine is massive individual and corporate tax incentives. Forget about the preposterous Keynesian-style stimulus that has proven time and time again to be stimulative to nothing but the deficit. Marginal tax rates for individuals and corporations must be reduced substantially. Productive activity is kindled when the rate on the next dollar of income is lowered. That is the fuel for entrepreneurship and investment. Simply handing out money directly or through tax credits does little or nothing to permanently enhance the productive capacity of our economic system. It's a catalyst for short-term spending (and saving), not for long-term, sustainable growth.
There's talk of passing a stimulus package of unprecedented size, targeted primarily at infrastructure (including Green infrastructure), when the new administration takes office. Given the choice of that type of stimulus and the one we had in February ($600 and $1,200 checks), the infrastructure-oriented one is clearly better. But, why focus on such a limited area when the problem is of such broad scale? Through tax policy, we can unleash the productive capacity of all businesses and all individuals, rather than just those industries who are targeted for Federal funds. Doesn't that make a lot more sense? No matter how many hundreds of billions of dollars the government allocates, it can never represent more than a small fraction of what the entire business and consumer communities are capable of. Additionally, tax policy doesn't require direct government outlays and all of the associated negative residue.
Let's get much more proactive and incent the trillions of dollars that are on the sidelines to be put to productive use. Consumer and business confidence will increase markedly, and we will start creating jobs again instead of hemorrhaging them by the hundreds of thousands.
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