I just read a sobering look at the economy in a Forbes OpEd. The link to the editorial, written by Nouriel Roubini, is here. Additionally, for the last week or so I have been reading Amity Shlaes’ good book The Forgotten Man, which is about the Great Depression, and I have been trying to have some perspective on all of this. Monumentally stupid actions by presidents Hoover and Roosevelt made the depression “Great” and it would seem smart to avoid those mistakes this time around.
I am not sure what the new President is going to do in terms of his stimulus package, nor am I sure that he really knows yet. Sometimes the guy strikes me as a little shell shocked (and without that teleprompter he stammers like… yes… George W. Bush). From the sound of it the Democrats’ plan includes some New Deal sounding public works projects. I am one who prefers the Tax Holiday idea over big government, big-government spending. I can certainly understand why the Congress and the President want to spend government money. Like every single thing they do it is all motivated by control and dependence: get more people dependent on you. Not only that but with this vague talk of infrastructure work there will be a lot of favors swapped to get this big project in this district, etc. But think about this: for every dollar that once resided in the pocket of a taxpayer, how many cents will ultimately get pushed back into the economy after sliming its way through so many layers of government? How efficient is that?
I would submit that if we put aside what is best for politicians for a moment we could all see that the tax holiday idea has significant merit. The idea, first put forth by Texas Rep. Louie Gohmert, is that the feds would not withhold federal taxes for two months. Your take-home money could be 15 to 30 percent bigger during that time. Do the math in your head and imagine what you would do with those two months worth of that extra money. As I have stated before in previous posts, some people would choose to simply save it as Roubini pointed out in his OpEd – resulting in no money into the economy but many people would spend it and many of those people would pay off debt with that money. How could it not help the US financial markets to have debt repaid? The politicans get up there and preen about helping “Main Street” (who else was sick of that phrase by September?) but they want to “solve” this problem with their typical self-serving methods. Recall the maxim that if the only tool that you have is a hammer, every problem looks like a nail to you. American politicians have their Big Spending hammer ready to go.
In all of this, let’s not forget that times of crisis are when people willingly let government seize more control over their lives. While all of these rich, sound-bited lawyers debate how to “save us” let’s remember that a lot of them are scheming. Do not forget how much the party currently in control of the entire government absolutely reveres FDR, the man who took advantage of the crisis in the 1930’s to remake our government and essentially invented what we now refer to blithely as Big Government. They have their template and they are ready to roll.