7 Ways to Fix the Economy
Anyone with half a brain can see that the U.S. economy is in a malaise. It’s just muddling along. Unemployment is still high. Economic growth is low. Prices are rising for goods and services (just think gas prices and food prices). Job creation is low (people you know that have been unemployed are still unemployed). Small businesses are still struggling to survive given decreased demand and tight credit. The real estate market is in the tank; house prices are still falling and foreclosures are likely to spike this year. The banks are still in trouble, despite what the Fed says and does. Federal budget deficits continue to be the norm, requiring additional increased in the national debt. There’s still a risk to the U.S. economy from the economic crises in Greece, Portugal, Spain, Italy and so on. All of these factors paint a pretty bleak picture for the health of the economy.
I wholeheartedly believe that the U.S. economy is on the brink of a double dip recession. I would even argue that the current environment is still recessionary even if it doesn’t meet the technical definition of a recession. I suspect if you’re one of the millions of Americans struggling right now you’d probably agree with that. If you’re doing well, you probably haven’t been impacted too much or noticed what everyone else is going through. Sadly, it’s a situation of those that have a job prosper while those who don’t have a job suffer, which on a side note is a sad reflection on President Obama’s class warfare strategy that is attempting to divide this country. While we may not be able to stop the economy from slipping back into a recession in the short term, we can take some actions to fix the economy for the mid and long term horizons. I think there are seven actions that need to be taken to get the economy back on track.
1st Way To Fix The Econmomy
Lower taxes—This is a no-brainer. If you cut taxes on individuals and businesses, the money saved in taxes and not misappropriated to Washington will either be saved or spent by the taxpayer. It’s just that simple. If you’re a worker and get a tax cut that saves you $1,000 for the year, you’re probably going to spend that which helps stimulate activity in the economy. Further, you’re probably going to spend that at a local business—a gas station, restaurant, grocery store, retailer. That helps more people like you. High taxes are a disincentive to work harder to earn more if each successive dollar is going to be taxed more.
There is currently an estimated $1.4 trillion, yes, trillion, in corporate profits that are overseas. The companies aren’t going to bring those profits back to the U.S. because of the tax rate that is one of the highest in the world. Let’s cut the corporate tax rate or give these businesses an incentive to bring the money back. How about something like this: We will allow you to bring back as much profit from overseas as you want so long as at least 25% is used to create new jobs, at least 25% is invested in growth projects or capital equipment, and at least 25% is returned to shareholders. Of course, we’ll have to prohibit payouts to executives like the payouts to the executives of companies bailed out by the federal government. This would put a tremendous amount of money back into our own economy instead of some foreign economy.
Look, I favor getting rid of the current income tax system altogether and replacing it with some sort of consumption tax or a flat tax. Either system would be vastly simpler than what we have now. It’s a sad state when more people are afraid of being audited by the IRS than they are of being mugged. Would we be better off with another tax system? Absolutely! But this is a fundamental difference in philosophies between political parties in America. There are those who feel the government is more capable of spending your money, thus they want higher taxes so that the politicians can redistribute your tax money in a way they think better fit. I fall on the side of those who feel that the individual taxpayer is more capable of deciding how to spend their hard earned money than a politician in Washington. Here’s what we know, as the government expands, individual liberties contract. I say the less Washington has to do with the economy and taxpayers’ lives all the better.
Stay tuned for most blog posts where I discuss six more ways to fix the economy!