WP: A Way To Revive Spending

[DjTj]

I heartilly disagree! A desire for small (and limited) Federal government is not anti-government as a whole. Only a government limited to it's proper role as was designed and documented in the Constitution.

So you're pro-choice rather than pro-abortion.

I think you may be grasping some on the impact of my plan. Whay would eliminating 12 months of Federal, personal taxes inspire companies to treat everything as income? I dont understand.

Well, if profits are taxed while income is not taxed, then there would be a strong incentive to make all distributions "income" rather than "profit."

Let's say you are Dan Snyder, and the Redskins made a large profit last year. Usually, you would allow that to be taxed as corporate income, because corporate income is taxed at a lower rate that personal income. But if personal income is tax free, you will instead just give yourself a huge raise and take all the profits as personal income.

The Redskins don't have a lot of owners, so exploiting the loophole would be easy, but for larger companies and publicly traded companies, it would be more difficult ... but if there is an avenue for income that is untaxed, you can be sure that corporations will find a way.

[nyskinsfan56]

Nope. cash can be put into a bank. Cash can be invested. Gift cards must be spent.

Let's try this again. I get a $2k gift card and spend it on groceries that I would have bought anyway and keep my cash in the bank/invest it...tell me what the difference is.

[JohnLockesGhost]

So you're pro-choice rather than pro-abortion.

Just because one isn't a glutton, that doesn't make him anorexic.

[DanNew]

Taiwan actually already did this:

http://www.cnn.com/2009/WORLD/asiapcf/01/18/taiwan.vouchers/

...don't know what effect it has had, but it goes to show that this isn't such a crazy idea.

DjTj, how did you come across that? I read a lot of economic posts, and this floored me! Looks like they're trying it for nine months, at a bigger relative size than I suggested.

The Taiwanese economy produces $373 billion each year. Our GDP is $14 trillion - America really is amazing - so their $108/person prepaid card would be the equivalent of about $4000/person here.

I see the Carrefour chain there saw its weekend receipts leap by 30%. It'll be interesting to watch what happens over the next months.

There is no difference between a gift card and cash...

I get a $2k gift card and spend it on groceries that I would have bought anyway and keep my cash in the bank/invest it

Good point: you could replace intended spending. You could also sell the card to someone who wants to use it, then deposit the cash.

I'd expect some people to do so, but as Taiwan found, people do spend when you make it easy for them.

I wasn't being cute when I compared it to having chips in a bowl on the counter: ease of access makes a real difference, and it's one reason this is far more effective than a rebate check that must be dropped in your bank.

My only concern is, what about small business that do not have the means for collecting off debit/credit cards?

I'm embarrassed to say I never thought of that, nor have I heard the question before. I'll think about how to address that. I overlooked the issue since a majority of payments in the U.S. are now done by plastic.

Everyone is in saving mode.

What needs to happen is the banks gotta start lending money.

Both those statements are right. But we do need consumer spending, too, since it normal years it provides the demand for 72% of everything made in America.

Investment and infrastructure programs may pick up some of the slack now that consumer demand has fallen so sharply, but it's expected to take months for such a shift.

As for this:

for me the choice of whether to create a job rests on only one thing: customer demand.

That's just common sense. And yet it is extremely controversial.

It's really true. Even lifelong pro-savings economists are saying that this particular year, we need to keep up consumer demand.

Any other year, if you took a statement like "The only way to prevent a deepening recession will be a temporary program of increased government spending" could you believe that came from Martin Feldstein, the most famous of conservative economists and a key adviser to the McCain campaign?

Feldstein continues in that article to say "Previous attempts to use government spending to stimulate an economic recovery, particularly spending on infrastructure, have not been successful because of long legislative lags that delayed the spending until a recovery was well underway,"

and

"While it would be good if some of the increased spending also contributed to long-term productivity, the key is to stimulate demand."

How about a prepaid gift card to get the ball moving?

[SnyderShrugged]

So you're pro-choice rather than pro-abortion.

Well, if profits are taxed while income is not taxed, then there would be a strong incentive to make all distributions "income" rather than "profit."

Let's say you are Dan Snyder, and the Redskins made a large profit last year. Usually, you would allow that to be taxed as corporate income, because corporate income is taxed at a lower rate that personal income. But if personal income is tax free, you will instead just give yourself a huge raise and take all the profits as personal income.

The Redskins don't have a lot of owners, so exploiting the loophole would be easy, but for larger companies and publicly traded companies, it would be more difficult ... but if there is an avenue for income that is untaxed, you can be sure that corporations will find a way.

ahhh, I think I see your point on the corporate income issue now. Definitely a monkey wrench! I'll have to think it through.

As to the abortion issue, I take a somewhat different stance than most everyday conservatives.

I dont think that any pro or anti abortion concerns should be at the federal level whatsoever. It's not a federal issue. It should be a state issue instead.

In abortion the major concern is life. Any other issue involving ending a life (murder) is a state, not a federal crime. Abortion should be regulated by the states.

That said, I also think that abortion should be looked at from the perspective of the individual whos life is ending, not the mother who sustains the baby for 10 months. But thats on a somewhat different topic so I'll leave off.

[SnyderShrugged]

not if you can't get a loan.

not if you can't find a job.

great so someone unemployeed goes from making zero to a 30% increase in zero.

You are forgetting that with a 30% increase in pay, the spending and investing that those individuals will do will ensure jobs and investment from the businesses that receive the benefit of said purchases.

You take the reach assumption that without government spending and gifts, that the economy will crash. I dont.:2cents:

[PleaseBlitz]

Nope. cash can be put into a bank. Cash can be invested. Gift cards must be spent.

Im sure it'll be real hard for people to use the gift cards to buy whatever they need for a few months while using their cash paychecks to pay off debt, it's what evil business type guys call 'moving numbers around on paper.' The end result is the same.