During these uncertain times, there are many differences of opinions about how our country got to this point, and to the direction that our country should go in moving forward. However, I am certain of one thing, we all want this economy to improve, and this terrible recession to end.
I am not an economist, nor am I really a partisan when it comes to politics, but I have been forced over the last year to think about economic matters a lot, and would like to share some of my insights…
I have heard, on several occasions, that upward of two thirds of the economy is based on consumer confidence and spending; that being the case, to “really” boost consumer confidence and spending, I would think that one of two things need to happen…either all goods and services would need to collectively drop in cost, or all consumers in The United States would need to collectively get a raise in income, so that they have more money to spend. Is either one or both of these two things possible?
Let’s first consider this…the federal government, on February 17, 2009, signed into law, The American Recovery and Reinvestment Act of 2009, which started out as The Stimulus Bill. The American Recovery and Reinvestment Act…it actually sounds kind of good on the surface, doesn’t it? I mean, what American doesn’t want to see investment in their own country? Our great country certainly deserves investment into infrastructure and some other things that have withered over time. When this bill was being debated, it was asked, how much of this 787 billion dollar bill would actually be stimulative? I thought that this was a great question, and my answer to that question was, “not a whole lot”.
For a moment, consider this…if you took a handful of darts, and all at once, threw them at a dartboard, how many of those darts would actually stick to the dartboard, let alone hit the bull’s eye? The current administration often used the term shovel ready; even if the project was permitted, designed, reviewed, re-visioned and approved; and all of the other red tape that goes along with major infrastructure projects, making it shovel ready, generally construction projects last for a period of time, then the people that worked on those projects, are often once again laid off; therefore, any job creation, or stimulative effects would be of a short term nature, in a so-called shovel ready project.
Let’s now go back to consumer spending and confidence…In the past, we have received stimulus checks (in the mail) from the government, for a few hundred bucks. While money is always welcome in my mailbox, I personally would have preferred the government to keep that money in The Treasury, in case of a national emergency, as I saw very little stimulative effect that would really come from it. In fact, it has been shown that most people either saved that money, or paid down some personal debt, and very little was pumped into the economy.
I think that the use of these small scale and non-stimulative rebate checks have been used by many as an argument against tax cuts. I do not believe that a small scale, one time rebate check will ever do much to stimulate the economy, however, I would like to see a complete tax holiday, eliminating income tax, sales tax, corporate taxes, and any other taxes for a specified amount of time, or until the economy gets back on it’s feet.
So let’s look at some facts…
- We know that consumer confidence and spending is a large key to economic growth.
- We know when people have a sustained raise of income, they have more money that they can rely on, and more money to spend.
- We know that if sales tax is suspended for a period of time, then people will be much more inclined to go spend more, which in return would create profits for businesses all around.
- We know if corporate tax is suspended, or lowered significantly, that companies will also have more money to retain and hire employees; and hopefully to invest into new business; not to mention the new businesses that may flock to The United States as a result of a low corporate tax.