While reading a post by Robert Reich tonite it occurred to me that 2009 will feature a battle of epic proportions, with the now styled Mini-Depression at center stage.
On the one side economists and the Democrat Congress, demanding quick action to drastically increase government spending on infrastructure, roads, highways and rail to create jobs and pump money into consumer's hands.
"First, understand that the main problem right now is not the supply of credit. Yes, Wall Street is paralyzed at the moment because the bursting of the housing and other asset bubbles means that lenders are fearful that creditors won't repay loans. But even if credit were flowing, those loans wouldn't save jobs ...This means bailing out Wall Street or the auto industry or the insurance industry or the housing industry may at most help satisfy creditors for a time and put off the day of reckoning, but industry bailouts won't reverse the downward cycle of job losses."
Ok, so far we agree, which is hard to believe since Reich comes from so far away to get even here. Now from my perspective he shows his true big government colors:
So the crucial questions become (1) how much will the government have to spend to get the economy back on track? and (2) what sort of spending will have the biggest impact on jobs and incomes?
The answer to the first question is "a lot." Given the magnitude of the mess and the amount of underutilized capacity in the economy-- people who are or will soon be unemployed, those who are underemployed, factories shuttered, offices empty, trucks and containers idled -- government may have to spend $600 or $700 billion next year to reverse the downward cycle we're in.
No, that isn't the only option. The biggest job creators are small businesses, who are being taxed and regulated into oblivion by the very big government that is now wanting to increase taxes to throw more money at the old business models that are cutting employees.
How about a totally different approach:
- Eliminate capital gains taxes - giving an immediate boost to stock prices
- Reinvigorate FHA and Homeownership Society concepts, we don't need to bailout bond holders who bought foolish sub-prime backed securities, we need to encourage home buyers to buy the inventory sitting in our communities. What we need are more buyers, and now. Did you know that right when we most needed buyers for homes this summer that President Bush and Congress eliminated one program that used "zero" government dollars to let buyers purchase with no money down? Why? because it made them all think they were "regulating away" risk. We need buyers now!
- Eliminate "mark to market" so that assets aren't being brutalized during this mini-depression.
- Stop the $700 Billion bailout, Paulson is already changing the plan, and it's too dangerous going into the new administration to allow Treasury unfettered ability to spend money on whatever they want.
- Where Reich is calling for $800 billion or more to build highways and bridges, much of this is already in numerous spending bills and merely marooned by regulations, red tape, and environmental largess ... call for a regulatory halt while we unwind our national economic crisis.
- Make insurance and healthcare expenditures tax deductible for all businesses and entrepreneurs. Give tax incentives to banks for loaning lines of credit to small businesses under $1,000,000. Don't go all regulatory like CRA on this, they can choose to pay less taxes or pay what they're paying now, get this "big daddy government" thing out of your heads.
- Lastly, remember the post 9-11 boom of SUV buyers, mainly because businesses were allowed to write off these purchases in full? Do the same for 2009 ... any automobile purchased in 2009 under $100,000 should be allowed a 100% write off to the business. This will create buyers, we need buyers.
Now .. That's Change. Change you can believe in. Change that creates jobs. Change that sells houses and cars. Change that gets banks to lend again or get out of the way.