Tuesday, January 06, 2009
How to Boost America's Economy - Give a Tax Cut without effecting Tax Receipts or Why we need real actions and not words? There has been a lot of talk about doing another stimulus package to help Americans and in turn rebuild the economy. While I don't mind a little scratch in my pocket, there is no way that these programs really help Americans in the long term. Why are we in the current situation that we are in? It has to do with consumption and satifying our wants more than thinking about our needs. The US government could give an immediate and long lasting tax cut (clue: its not a real tax cut) to the American people by enacting a few simple rules. The first real issue is that we have all succumbed to predatory lending practices. This is not a mortgage issue alone. Take a look at your wallet. Most of the people stuck in bad mortgages aren't ones that got suckered by 2yr, 5yr ARMs (adjustable rate mortgages). They got suckered by their creditcard company. The first act by the new government should be to force all the banks that have received TARP funds to immediately drop the interest rate on all issued creditcards down to 7 or 8%. They also should restricted from charging interest on interest accumulated. This will immediately put money back in the pockets of Americans on an ongoing monthly basis. Second, the government should give immediate tax cuts to corporations who manufacture goods in the United States. Not assemble goods, but actually manufacture them. They need to provide tax incentives to companies to switch from overseas manufacturing to the US. If you want to make America strong, you need to give companies a good reason to make a switch. The tax break should be designed to limit the negative impact of higher costs of producing here. However, I would venture a guess that the available job pool has grown so dramatically and is probably skilled enough and hungry enough to limit the cost of the transition. This is just a start. Now, with regard to all the busted mortgages out there again, concessions to greed have to be made. It would be truly unfair for the government to bailout individuals who were not smart enough to understand that their mortgages were going to have a sudden jump when their adjustment period came and not help everyone else. For individuals who are going through the foreclosure process who have jobs, but just no longer the wherewithal to pay their mortgage, there needs to be an extreme home mortgage. Rewrite the mortgage, reduce the interest rate from its high levels down to 5-6% and lengthen the time from 30 years to 45 or 60 years. Which would you rather have as a bank, a loan holder who can pay on time every month or own an over-inflated valued property that you'll sell for a significant loss? Add to the mortgage a 2% early sales fee, to make up some of the difference you had on the original interest and call it a day. These two things will add back to the economy a tremendous amount of buying power. End of Part 1.