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February 18, 2009

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John

If you don't mind, I'd like to borrow your own words to show the problem with the so-called stimulus. And this'll probably run long, because I don't know when to shut up about these things.

"Record high unemployment numbers"

Why? Partly because we've spent twenty years giving tax breaks to any company that would send work overseas. Also, because the banks have learned that they get free money if they refuse to lend to businesses.

"more people about to lose their jobs"

Again, why? Because nobody has fixed those tax breaks or leaned on the banks.

"retirements savings being wiped out, 401ks dropping by at least a third or more"

This is a little more complex, but we've all been tricked into investing in the stock market to boost the portfolios of the people who got there first. It's been a bubble, just like the dot-com bubble, and it's bursting.

The money in the stock market was never there in the first place. And now that people are running out of money (see the foregoing), they need to cash out their investments, bursting the bubble.

Unfortunately for the people who invested, this is what the stock market was supposed to look like all along. After all, the only stock sale that's important to industry is the IPO. After that, you're just speculating on the collector's price of a sheet of paper that you never see.

(For twenty years, we've been told that the stock market "always" increases by twelve percent annually, and that we should convince our friends to invest. Does that sound like anything else you've reported on recently...? Perhaps run by someone who's still only under house arrest in his lavish penthouse apartment?)

"people losing their houses"

...because they no longer have jobs, and the banks are completely uninterested in lending to help.

"stores and businesses closing"

And that's a direct result of everything above. Businesses can't maintain customers or loans, meaning layoffs or shutting down.

Which, by the way, means that you should all start sharpening your pencils and writing about the commercial real estate collapse that we're going to see as a result of this.

So, if we take a look at our problems from a sky-high view, we see that there are two problems causing everything else: Tax breaks for offshoring labor and obstructionist lenders.

This is causing unemployment and foreclosures, which then feed one another.

What does the stimulus do? It gives money to the Census Bureau. It creates a national health database and tracking system. It will hire people for a few months to fix some potholes, then lay them off again. And it takes from you eight fewer bucks a week in taxes and eating the sales tax for anybody with enough cash and credit to buy a car.

Which of those problems have we helped? Only the job problem, only temporarily, and only for essentially unskilled labor. The rest has nothing to do with the economy at all, except that somebody's getting a big check.

A real, working stimulus package would:
- Reduce taxes significantly across the board, except for whoever's still exporting jobs.
- Further reduce taxes on brick-and-mortar retailers, to prevent the commercial real estate implosion I mention above.
- Also further reduce taxes for anybody who's self-employed, because small businesses are our best hope for recovery, because they can expand quickly and hire people faster than GM or Microsoft can.
- Revoke the charters of any banks that aren't working in the interests of their clients.

Notice, by the way, that none of this costs a dime. The Federal Government will lose some tax revenue, sure, but it'll be a lot less than the loss they'll suffer when none of us can pay our taxes next year.

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