Aramike's Economic Stimulus Package

[Aramike]

There is no doubt that the current economic "stimulus" travelling through Congress is a load of bull and pork. Besides the obvious special interest garbage, the spending on infrastructure will do nothing to stimulate our economy. Seriously, give a local goverment $10 million for roads - do you HONESTLY believe that any shovel will hit the ground within a year or two?

Unlikely. First there would be months of discussion on exactly where to build roads. Next there would be months of bidding by contractors. There will be environmental impact hearings. There will be protests. Yadda, yadda. We all is said and done, it could be upwards of three years before any of that money is actually spent - which does nothing whatsoever to stimulate the economy.

So, I propose a two part solution:

Part One: Cut the corporate tax rate from around 35% to about 20%. This move would IMMEDIATELY add billions of dollars to the corporate coffers, allowing for job creation, innovation, modernization, etc. But, more importantly, this would immediately impact earnings and stock dividends and begin increasing the value of investments. I'd bet the stock market would gain upwards of 30% within the year due to this alone, as the value of shares would immediately be increased. Also, this would positively impact retirement funds that may have been degraded during this economic slowdown.

Finally, this would attract businesses BACK to the US, as many have moved elsewhere in order to benefit from favorable tax environments. Add all of the above together, and you see instant job-creation which adds money to the economy, which creates government revenue, which helps compensate for tax cuts, which ... on and on.

Part Two: Consumer spending MUST be stimulated immediately. Demand for goods and services is the primary key to driving our economy, even moreso than the markets as demand tends to dictate stock values. But, as we saw, sending people checks had limited impact due to that money simply not being infused into the economy. A lot of that money made its way into either housing payments or, indirectly, the markets where it simply disappeared along with property and share values.

My solution is this: send ALL *TAXPAYERS* a rebate around $600 ... in the form of a Visa/Mastercard/AMEX giftcard. This way, the money will be forced into the private economy and be recouped due to increase tax revenues resulting from higher employment which naturally comes with higher consumer spending. People will still have to use their regular incomes to pay their bills ... this money would directly impact the economy.

I believe this is a reasonable, no bull approach to fixing our economic woes. We are facing a situation where we NEED to stimulate the economy - not use our troubles as an excuse to advance any agendas.

[UnderseaLcpl]

I like it but I'd be in favor of cutting the corporate tax rate to 0%

[rubenandthejets]

A lot of countries are trying this-Japan is doing it yet again, even though a cash handout did jack las time and polls in Australia show more than half the people are going to SAVE the money....

Maybe the money would be better spent on reducing the huge US national debt.

[UnderseaLcpl]

Originally Posted by rubenandthejets

A lot of countries are trying this-Japan is doing it yet again, even though a cash handout did jack las time and polls in Australia show more than half the people are going to SAVE the money....

Maybe the money would be better spent on reducing the huge US national debt.

It would only reduce it by less than a tenth. I think we need to cut spending drastically and eliminate the deficit first.

Lowering company taxes would not do a lot but give the US government even less room to maneuver. The economy does not have a tax problem, the econmy has a credit problem, as the banks do not give out money urgently required by companies to aquisitions and investments. Cutting taxes won't help this companies at all in bringing up this money. It certainly won't help the government, which is a record deficit and debt situation and hardy able to act anymore, resulting in even more debts following generations have to carry.

Fiddling around with taxes won't do a lot in such a situation. It's up to the banks to give out money again, and the framework for this needs to be laid. Everything else is just money taken from the government the regular taxpayer has to compensate for. After all, infrastructure and education still has to be paid, and all this forms the foundation propper growth relies upon, not to talk about hospitals, the military and all the other expenses the state has to come up with.

[SteamWake]

Originally Posted by Aramike

So, I propose a two part solution:

Part One: Cut the corporate tax rate from around 35% to about 20%.

Some good ideas there but Im afraid you lost the vote right there.

The "Stick it to the Man" mentality still prevails.

[UnderseaLcpl]

Originally Posted by SteamWake

Some good ideas there but Im afraid you lost the vote right there.

The "Stick it to the Man" mentality still prevails.

To hell with that, it's a one-way ticket to socialism. Stick it to the Government. They made laws to promote lending to high-risk people, they endorsed the creation of a central bank, they took away the backing of the currency, they heaped a mountain of public debt on the country so we don't have any money for crises like this and since they took it upon themselves to regulate the banks, they are equally culpable for failing to do it properly.

Originally Posted by Bewolf

Lowering company taxes would not do a lot but give the US government even less room to maneuver. The economy does not have a tax problem, the econmy has a credit problem, as the banks do not give out money urgently required by companies to aquisitions and investments. Cutting taxes won't help this companies at all in bringing up this money. It certainly won't help the government, which is a record deficit and debt situation and hardy able to act anymore, resulting in even more debts following generations have to carry.

I disagree, cutting corporate taxes would, as Aramike said, free up a ton of capital for investment. Tax is a very significant overhead for most businesses. Cutting it, or better yet, eliminating it, immediately frees up all that capital. On the other hand, just trying to wedge the banks into a position to give them a loan takes longer, requires costly oversight, and the business now has to pay back that money, which means that they will spend it more cautiously.
As for taking away the government's "maneuvering room", there are those who think that is a good thing. Cutting taxes cuts their spending power. It forces them to cut spending in other areas. I think that's a good thing, since they have proven so inept at spending the money they take from us already.

Eliminate corporate tax (and subsidies), drastically cut spending, and then just step back and let the market do its' work. Every time the government has stepped in during an economic crisis they have only ever made it worse. This time will be no different.

[TarJak]

Originally Posted by Aramike

Unlikely. First there would be months of discussion on exactly where to build roads. Next there would be months of bidding by contractors. There will be environmental impact hearings. There will be protests. Yadda, yadda. We all is said and done, it could be upwards of three years before any of that money is actually spent - which does nothing whatsoever to stimulate the economy.

I disagree with this assessment. In that 3 years ALL of the money for the roads will have been spent arguing about where they could be put and the economy will be stimulated in that lawyers and environmental study contractors will take the lot and spend it on cars and boats and the like.

[Digital_Trucker]

Originally Posted by TarJak

I disagree with this assessment. In that 3 years ALL of the money for the roads will have been spent arguing about where they could be put and the economy will be stimulated in that lawyers and environmental study contractors will take the lot and spend it on cars and boats and the like.

Ain't that the truth. And then, we personally will be "stimulated" when we have to pay the bill.

[Zachstar]

More corp tax cuts? You have seen how they use this new "money"

MS cut workers on profitable projects.

At best the money will be used to build more facilities in India.

A big HELL NO from me.

[Aramike]

Originally Posted by Zachstar

More corp tax cuts? You have seen how they use this new "money"

MS cut workers on profitable projects.

At best the money will be used to build more facilities in India.

A big HELL NO from me.

This kind of uninformed, anti-corporate rhetoric is the very reason corporations choose to leave the country (along with their jobs and tax revenue).

Businesses are not obligated to have a certain number of jobs available. They have every right to manage their bottom lines the way they see fit. Ultimately, they're going to so what they believe is in the best interest of their bottom lines, and there is absolutely nothing wrong with that.

Sure, there are bad apples out there, but that's the distinct minority.

When corporations have more money, where do you think it goes? My retirement fund has a lot invested in corporations. They make more money? I make more money.

They can then afford to create jobs in order to foster a better working environment. They may be able to offer additional benefits. The entire concept of the term "corporate greed" is preposterous to me. Wanting to make money in the business world isn't greed, it's simply wanting to be successful.

Taxing businesses to death costs us all. Prices go up, jobs are lost, the stock market devalues, retirees lose money, etcetera.

As for your big "HELL NO", care to share why??? What direct benefit do you see in keeping corporate tax rates uncompetitively high? Or, is it just your way of punishing business and "sticking it to the man"? (Ironically, it's "the man" sticking it to the people, but hey...)

Undersea: Good points, man.

[Aramike]

Originally Posted by TarJak

I disagree with this assessment. In that 3 years ALL of the money for the roads will have been spent arguing about where they could be put and the economy will be stimulated in that lawyers and environmental study contractors will take the lot and spend it on cars and boats and the like.

:rotfl:

So true...

[UnderseaLcpl]

Originally Posted by Zachstar

More corp tax cuts? You have seen how they use this new "money"

MS cut workers on profitable projects.

At best the money will be used to build more facilities in India.

A big HELL NO from me.

Skipping right over the issue that the Federal Government is exercising unconstitutional power by taxing corporate revenues directly(i.e., not in the form of tariffs), your oversimplified statement as to what companies will do with that money is mind-boggling.

Let's start with the basics. There are a lot of companies that simply cannot outsource labor because they either cannot outsource their goods/services, or they are literally sitting on top of their product, and the product happens to be in the U.S.
Examples include almost the entire service industry, the agricultural industry, the domestic transportation industry, a good portion of the energy industry, the retail industry, the legal industry, most of the financial industry, resource extraction industries etc etc....

Secondly, cutting corporate taxes makes companies more profitable, obviously. A company that is not profitable goes out of business, and provides no jobs, no money, and no economic benefit, except a brief boost to the legal industry. In a worst-case scenario, the state intervenes and either nationalizes the industry (and nationalized industries have a notorious history of abject failure) or gives them money to fail more. That policy hurts everyone.

It is true that healthy companies are cutting jobs as well, but they are doing that to hedge their bets. Smart companies do that. Dumb companies would include companies that preserve jobs that are not absolutely essential. Right now, companies need to save money and scale back production to weather the crisis. That's something that the government, who gets all their tax money, has not demonstrated a willingness to do.


Perhaps some companies will outsource labor to India, or wherever else. So what? Who cares if they export the nation's crappy industrial-era jobs to another country? The important thing is that the company is based here, and that the money it earns mostly comes back here. Cutting corporate taxes would cause industries the world over to flock to our shores, especially in the current crisis. (A better education system would also help, but that is another discussion). Cutting business regulation to a bare minimum would also help; legal expenses are a hefty burden to bear in our justice system.

In any case, I'd love to hear what you would do with the money. We have a Capitol full of politicians who think that they know how to best spend others' money and it doesn't take a genius to see how that has affected our economy over the years. Not only have they consistently failed to provide solutions, but they have also managed to plunge the country into unthinkable levels of debt.

And should you doubt these ideas, I'll be happy to point out a slew of countries that have very high standards of living, often with few natural resources, whose only common trait is a relatively free economic policy. I'd also be happy to point out an even greater number of countries that subscribed to the "centralist planning" philosophy and are now hotbeds of poverty, famine, and war.


And all this is not even considering that every dollar spent on this "stimulus package" is money that the U.S. does not have, meaning it must be borrowed or printed, meaning, it directly contributes to inflation. But honestly, I'd like to hear what you think should be done with it. Here's 850 billion dollars in fiat currency; what would you do with it?

edit- darn. Aramike beat me to it. I guess that's what I get for being so long-winded.

[PeriscopeDepth]

A US Dollar is backed by people's belief in the ability of the Federal Government of the United States to continue to exist. The government exists through tax dollars. Theoretically, the economy grows and literally more dollars are created by the government which is OK because the economy has grown and with it an increase in the government's tax revenue.

The government taking on the massive amount of debt (much of it toxic debt taken on from private sources in the recent bailouts) it has in the past decade or so with no end in sight and no sign of economic growth is a major problem. Because they are putting more money into the system and there HAS NOT been an increase in tax revenue, if anything a decline. So that debt has to be financed. And various private and foreign state entities buy it because they believe they will be paid back. But happens if those entities stop investing in the US debt (for any number of reasons, not necessarily to be malicious)? Then the ability of the US Federal Government to spend is virtually destroyed. And combine that with the coming double digit unemployment rate and you have a very bad situation.

So I would have to say I disagree with your plan Aramike. Just another way to drastically increase debt, which is INCREDIBLY dangerous at this point. We need to focus on eliminating debt right now.

You can't just make it go away with shuffling paper.


PD

[Aramike]

edit- darn. Aramike beat me to it. I guess that's what I get for being so long-winded.

Heh, perhaps but your post was more complete.

In any case, something else I find interesting is when people (typically on the left) present the idea that under-regulation is what got us into this mess. Personally, I believe it is quite the opposite. We've created a tax-hell, and a business climate where companies are almost forced to take heavy risks just to maintain viability. Then, the government creates ridiculous standards such as the Fair Housing Act which individuals have perverted into tortious-style litigation.

Yes, there are and will always be a few bad business practices out there ... but you don't destroy the orchard because of a few rotten apples.

Ask yourself: if the government were a business, do you think it'd still be in business?