Forgive me if I appear to be stating the obvious, but our free-market economy is based on a delicate balance of supply and demand.ÃƒÂ‚Ã‚Â Usually, with minor adjustments to the supply of money, we can maintain that delicate balance.ÃƒÂ‚Ã‚Â Not so in the past couple of years.ÃƒÂ‚Ã‚Â As the cost of gasoline, heating fuel, groceries, etc., has gone up, and wages and the jobs have diminished, the ability of consumers to BUY has gone down, right?ÃƒÂ‚Ã‚Â The ÃƒÂ‚Ã‚Â“demandÃƒÂ‚Ã‚Â” side of our economic equation is grossly out of balance with our capacity to make things.ÃƒÂ‚Ã‚Â When there is no demand to buy the things we make, there is no need to pay people to make those things and massive jobs cuts happen. Sound familiar?
In order to fix our economy, we MUST create demand for goods and services. Americans need to start buying ÃƒÂ‚Ã‚Â– houses, cars, appliances, computers, food, clothing, computers, etc. But if they have no money, or are afraid of losing their jobs, or are hording their cash to weather this financial storm, they arenÃƒÂ‚Ã‚Â’t buying, right? How do you create incentive for them to BUY?
Crazy Idea #1: At last count, the price tag on the economic stimulus plan was approaching $1 TRILLION. If you took that $1 TRILLION dollars, divided it by every American citizen (roughly 250 million people), it would approximate $4,000 per citizen, right?ÃƒÂ‚Ã‚Â Put that amount on a debit card -- $4,000 per American citizen ÃƒÂ‚Ã‚Â– and hand them out.
A household of four receives a debit card with a $16,000 on it. A household of three, $12,000. Got the math? Pretty simple so far, right?
The credit cannot be deposited into savings accounts or used to pay down on their mortgage.ÃƒÂ‚Ã‚Â The debit cards can only be used for a down payment on a house, to buy cars, appliances, pay for daycare, school tuition, school lunches, gas for their cars ÃƒÂ‚Ã‚Â– they can be used only to BUY goods and services, and they are only good for 18 months.ÃƒÂ‚Ã‚Â If you donÃƒÂ‚Ã‚Â’t spend the debit card within 18 months, it expires ÃƒÂ‚Ã‚Â– you lose the money.
Can you imagine how many consumers would line up at car dealers to buy a new or used car?ÃƒÂ‚Ã‚Â Can you picture people pulling out their debit card to put a down payment on a home, whether itÃƒÂ‚Ã‚Â’s their first, second, third, or an investment property?ÃƒÂ‚Ã‚Â The car dealers would run out of cars and call Detroit, saying, ÃƒÂ‚Ã‚Â“Make more cars!ÃƒÂ‚Ã‚Â” and Detroit would hire workers to make more cars, and they would call companies in Grand Rapids to order more parts to make the cars, and Grand Rapids companies would hire workers, and the taxes paid buy all of those workers would build roads and improve school lunches, and so on and so on ÃƒÂ‚Ã‚Â…
Sure, itÃƒÂ‚Ã‚Â’s a crazy idea and I donÃƒÂ‚Ã‚Â’t give it a snowballÃƒÂ‚Ã‚Â’s chance of ever happening, but as a nation and government, we need to start thinking differently.
Crazy Idea #2: The economic stimulus plan calls for income tax cuts for middle-income Americans from 25% to 15% of their gross wages. Great idea. It would noticeably, positively and immediately impact the bulk of American households. For example: If your family income last year was $60,000, this tax cut will put $6,000 more in your pocket to spend this year.ÃƒÂ‚Ã‚Â Could you use an extra $500 a month in after-tax income?ÃƒÂ‚Ã‚Â ÃƒÂ‚Ã‚Â If your family income was $100,000 last year, you will see an extra $800 a month in your take-home pay.ÃƒÂ‚Ã‚Â”
Can you imagine what would happen if everyone, not just middle-incomes, paid a 15% income tax over the next few years? Do you think those folks making household incomes of $300,000 who would have $30,000 more disposable income wouldnÃƒÂ‚Ã‚Â’t go out and BUY THINGS ÃƒÂ‚Ã‚Â… or invest in companies who hire workers?
If you begin to focus on real-dollar, disposable-income increases for the vast majority of Americans, you will begin to build hope in people.ÃƒÂ‚Ã‚Â Not false hope, but real hope and (consumer) confidence that they will be better able to feed their families, make their car payments, keep a roof over their heads and maybe even have a little money left over to go buy that new refrigerator.
Crazy Idea #3: You want to get rid of the glut of foreclosure properties FAST and fix our current real estate problem?
ItÃƒÂ‚Ã‚Â’s simple. No government bailout, no throwing money at the problem.ÃƒÂ‚Ã‚Â Simply eliminate the capital gains tax on investment properties purchased during the next three years.
Can you imagine how many people with money invested in 401KÃƒÂ‚Ã‚Â’s which have lost 30% of their value, or CDÃƒÂ‚Ã‚Â’s that pay next to nothing, or savings accounts, would RUSH to buy distressed real estate? Real estate agentsÃƒÂ‚Ã‚Â’ phones would ring off the hook with calls like this: ÃƒÂ‚Ã‚Â“IÃƒÂ‚Ã‚Â’ve only got a half a million left in my investments after AIG destroyed me.ÃƒÂ‚Ã‚Â I want to buy eight of those $40,000 foreclosure properties fix them up, and sell them (or rent them) and when I sell, I get to keep every nickel of profit. LetÃƒÂ‚Ã‚Â’s go shopping!!!ÃƒÂ‚Ã‚Â”
Can you imagine how fast and furious real estate investors would rush into the market to take advantage of such a program? And what would that cause is this:
Most of them will hire the work done.ÃƒÂ‚Ã‚Â They will call plumbers and electricians, furnace and air conditioning people, tile and carpet installers, window replacement companies, and so on and so on ÃƒÂ‚Ã‚Â…
Suddenly (within 12 months), the glut of homes forcing real estate values down would be absorbed by the private sector, not by the government, and the homes left on the market are those in marketable condition, not distressed condition.
Crazy Idea #4: Reinstate consumersÃƒÂ‚Ã‚Â’ ability to write off interest paid on credit cards, auto loans and second homes.ÃƒÂ‚Ã‚Â Those interest write-offs were eliminated during an inflationary spiral to curb excessive spending.ÃƒÂ‚Ã‚Â We are in a recessionary plunge now, we need reinstated.
In summary, investment in green technology is a wonderful idea ÃƒÂ‚Ã‚Â– so is a national energy policy -- but it will not fix our economy; it cannot, will not drive the economic bus. Yes, we need to fix our roads, but it might be a bit more affordable to do if the cost comes out of the taxes withheld from workers who now again have jobs.
Crazy Idea #5: Whether you support Democrats, Republicans or are independent, all of us will petition to eject our politicians from office if they donÃƒÂ‚Ã‚Â’t put aside their partisanship and start working together to fix our economy.
This economic crisis is enormous. It will take ALL of us, rich and poor, conservative and liberal, black and white, to fix this.
We must all start tugging on the same end of the rope.