Government stimulus is not the only answer

Published 12:46 pm Thursday, February 19, 2009

By Staff
The non-partisan Congressional Budget Office said this week that while President Barack Obama's economic recovery package might help in the short term, it will actually hurt the economy more in the long run than if Congress were to do nothing.
At this point, we need a fix of some kind, I'm not disputing that. While I'm not entirely opposed to simply doing nothing and letting the free market fix this mess, I also realize that we may be too far beyond a safe point to try that experiment.
But "doing something" doesn't necessarily need to mean government spending.
If you want to buy a $100 pair of shoes with a $100 bill that you have in your pocket, do you hand the $100 bill over to the cashier, or do you charge the shoes to your credit card, deposit the $100 bill in the bank and then pay the credit card bill plus any interest owed on the purchase? You pay for the shoes directly, of course, because using your credit card ultimately costs you more money.
What the small amount of this stimulus bill coming back to taxpayers is equivalent to is the credit card metaphor. It ultimately costs us more than if we were to just hold on to that money and stimulate the economy with it directly.
Of course, only 22 percent of the $1 trillion stimulus bill is tax breaks – the rest is new spending.
I have two ideas to stimulate the economy. Both would work, because both would be immediate and would sustain the natural flow of money (business pays employee, employee spends money at another business, who pays another employee, and so on and so forth). Best of all, under either of my plans, the government wouldn't increase spending.
The first idea is to cut income tax rates for every single taxpayer in the country in half for a period of two and a half years. It's that simple. Should any elected officials take this idea and write a bill around it, I request that the bill is exactly one sentence long and reads: "Income tax rates for every single taxpayer in the United States of America shall be reduced by half for the remainder of 2009 and all of 2010 and 2011."
How would this help? First of all, we'd each have a lot more money to spend. I know with the additional money I'd have I might buy a new car, spend more at local restaurants, and increase my donations to charity.
But won't that mean we'll have less money for the government to spend? In the short term, yes, but it will be less than $1 trillion, and the money I spend and you spend and everyone you know spends will help create new jobs and increased taxable income for car salesmen and waiters everywhere.
The second idea I have would be a permanent change: eliminate national income taxes for all higher education graduates for five years after their graduation. This could be from a technical school, a four-year university, law school, or even cosmetics school.
Those earners aren't typically in a high income bracket, but they're also highly likely to want to purchase items like cars and first homes before getting married and starting a family. It also has the added benefit (or perhaps the primary benefit) of providing additional incentive to seek higher education.
There are countless other solutions that could provide stimulus to our economy without requiring government spending. It's unfortunate that our elected officials continue to rely on old tactics that haven't really fixed anything.