Fiscal Policy--The Pundit's Way

How we doin'? We've been out from under the Bush/Cheney administration now for just over 4 months. We are in a post-stimulus, post TARP, post Automotive industry period. Everyone "feeling groovy"?

Probably not. The latest unemployment numbers show that the rate of job loss has slowed. New Jobless claims have slowed to about 630,000 jobs a month? That doesn't sound too promising. But here's the thing--the rest of the world is stuck in the mud too. So we have a chance to figure this out, and lead the world recovery, giving us "first mover advantage" on new technology, business models, and trade opportunities. This may also entice foreign investment. If we can just get things moving again here. So how do we do it?

Here are a few things that I wish Washington had the guts to do to help kick start an aggressive growth fiscal policy, but probably won't ever get around to doing, because it's actually hard. So let's get all hypothetical about what can be done, shall we?

Here's a few suggestions:

Personal Fiscal Stimulus

1. Mortgage Refinance--I have been banging the drum on this for months. You want government intervention? Let's submit that the Fed, or Treasury (not sure which these days) opens the fed window to offer refinancing to all credit risks above 700 at 4%. That's right. 4%. For an average taxpayer paying 6% on a $200k mortgage, that's a monthly savings of almost $250. PER MONTH. So EVERY month, this family has $250 more to spend or save. $3,000 per year. Think of it as a reward to credit risks who actually pay their bills on time.

2. TARP "Refund"--as I have mentioned previously, let's allow the banks to start repaying TARP. Let's take the first $350B in paybacks, and give a $1,000 per person tax credit. For a family of four, that's a $4,000 stimulus check.

3. Auto incentives--$5,000 tax CREDIT for new auto purchase. Phase out $1,000 each year to 2014. It's too hard to say it has to be an American car, because the foreign car companies all make their cars here, and the American car companies all make their cars overseas. But many people don't even pay $5k a year in taxes to begin with. I have to believe people will buy a Ford Focus if you offer it to them for a 25% discount.

4. Energy incentives--conversions of homes to natural gas or electric heat--$1,000 tax CREDIT. Let's make foreign oil less "in-demand" shall we?


Business Fiscal Stimulus

a. Corporate Tax Rate Cut--I am not sure of the Constitutionality or the feasibility of this suggestion, but here it goes. Lower business taxes to 20% for Corporations, but demand that they be domiciled in the US, and that if they outsource jobs overseas, they will incur a 10% surcharge on profits. All profits. We talk a LOT about how great the American worker is, if we only give him or her a chance to be competitive. Here's that chance.

b. Empowerment Zones--yeah, perhaps a little nutty. But in a tip to the late Jack Kemp, let's give it a whirl. Can Gary, Cleveland, Detroit, Pittsburgh, and the rest of the upper mid-west really produce good products? Let's give companies an excuse to locate in these areas, tax free. Why not include New Orleans, Kentucky, Montana, New Mexico, or others in that fight? What about slicing taxes for businesses who want to relocate to AMERICAN cities? After all, we DO want a functioning economy, right? As long as we're going into debt, why shouldn't we cut the taxes on OURSELVES?

c. Health Plan--WITH Public Option--you want a competitive American worker? Get the health care expenses OUT of the workplace. It's time to call for health care that is tied to the INDIVIDUAL. There may be some viable options, and they may have to be a bridge (ie, the Swiss model). But in the end, a public option health system is the one that will, in my opinion, actually HELP us keep jobs in America. By taking the health care cost differentiator off the table.

d. Carbon Tax--Again, it sounds counter intuitive, but a clean energy incentive could be equally constructive. But this is an effort to drive up the Demand side of the equation, by forcing companies to demand cleaner energy technology, and create a market for non-Carbon Dioxide producing energy.

To those of you who think this is a little much, I ask you, "Do we want to tinker around the edges of our economy, or do we want to fix it?" Let's get some ideas out there, and put real money in people's hands again.