Five Crazy Ideas to Save Our Economy
In order to fix our economy, we MUST create demand for goods and services. Americans need to start buying ÃÂ houses, cars, appliances, computers, food, clothing, computers, etc. But if they have no money, or are afraid of losing their jobs, or are hording their cash to weather this financial storm, they arenÃÂt buying, right? How do you create incentive for them to BUY?
Crazy Idea #1: At last count, the price tag on the economic stimulus plan was approaching $1 TRILLION. If you took that $1 TRILLION dollars, divided it by every American citizen (roughly 250 million people), it would approximate $4,000 per citizen, right?ÃÂ Put that amount on a debit card -- $4,000 per American citizen ÃÂ and hand them out.
A household of four receives a debit card with a $16,000 on it. A household of three, $12,000. Got the math? Pretty simple so far, right?
The credit cannot be deposited into savings accounts or used to pay down on their mortgage.ÃÂ The debit cards can only be used for a down payment on a house, to buy cars, appliances, pay for daycare, school tuition, school lunches, gas for their cars ÃÂ they can be used only to BUY goods and services, and they are only good for 18 months.ÃÂ If you donÃÂt spend the debit card within 18 months, it expires ÃÂ you lose the money.
Can you imagine how many consumers would line up at car dealers to buy a new or used car?ÃÂ Can you picture people pulling out their debit card to put a down payment on a home, whether itÃÂs their first, second, third, or an investment property?ÃÂ The car dealers would run out of cars and call Detroit, saying, ÃÂMake more cars!ÃÂ and Detroit would hire workers to make more cars, and they would call companies in Grand Rapids to order more parts to make the cars, and Grand Rapids companies would hire workers, and the taxes paid buy all of those workers would build roads and improve school lunches, and so on and so on ÃÂ
Sure, itÃÂs a crazy idea and I donÃÂt give it a snowballÃÂs chance of ever happening, but as a nation and government, we need to start thinking differently.
Crazy Idea #2: The economic stimulus plan calls for income tax cuts for middle-income Americans from 25% to 15% of their gross wages. Great idea. It would noticeably, positively and immediately impact the bulk of American households. For example: If your family income last year was $60,000, this tax cut will put $6,000 more in your pocket to spend this year.ÃÂ Could you use an extra $500 a month in after-tax income?ÃÂ ÃÂ If your family income was $100,000 last year, you will see an extra $800 a month in your take-home pay.ÃÂ
Can you imagine what would happen if everyone, not just middle-incomes, paid a 15% income tax over the next few years? Do you think those folks making household incomes of $300,000 who would have $30,000 more disposable income wouldnÃÂt go out and BUY THINGS ÃÂ or invest in companies who hire workers?
If you begin to focus on real-dollar, disposable-income increases for the vast majority of Americans, you will begin to build hope in people.ÃÂ Not false hope, but real hope and (consumer) confidence that they will be better able to feed their families, make their car payments, keep a roof over their heads and maybe even have a little money left over to go buy that new refrigerator.
Crazy Idea #3: You want to get rid of the glut of foreclosure properties FAST and fix our current real estate problem?
ItÃÂs simple. No government bailout, no throwing money at the problem.ÃÂ Simply eliminate the capital gains tax on investment properties purchased during the next three years.
Can you imagine how many people with money invested in 401KÃÂs which have lost 30% of their value, or CDÃÂs that pay next to nothing, or savings accounts, would RUSH to buy distressed real estate? Real estate agentsÃÂ phones would ring off the hook with calls like this: ÃÂIÃÂve only got a half a million left in my investments after AIG destroyed me.ÃÂ I want to buy eight of those $40,000 foreclosure properties fix them up, and sell them (or rent them) and when I sell, I get to keep every nickel of profit. LetÃÂs go shopping!!!ÃÂ
Can you imagine how fast and furious real estate investors would rush into the market to take advantage of such a program? And what would that cause is this:
Most of them will hire the work done.ÃÂ They will call plumbers and electricians, furnace and air conditioning people, tile and carpet installers, window replacement companies, and so on and so on ÃÂ
Suddenly (within 12 months), the glut of homes forcing real estate values down would be absorbed by the private sector, not by the government, and the homes left on the market are those in marketable condition, not distressed condition.
Crazy Idea #4: Reinstate consumersÃÂ ability to write off interest paid on credit cards, auto loans and second homes.ÃÂ Those interest write-offs were eliminated during an inflationary spiral to curb excessive spending.ÃÂ We are in a recessionary plunge now, we need reinstated.
In summary, investment in green technology is a wonderful idea ÃÂ so is a national energy policy -- but it will not fix our economy; it cannot, will not drive the economic bus. Yes, we need to fix our roads, but it might be a bit more affordable to do if the cost comes out of the taxes withheld from workers who now again have jobs.
Crazy Idea #5: Whether you support Democrats, Republicans or are independent, all of us will petition to eject our politicians from office if they donÃÂt put aside their partisanship and start working together to fix our economy.
This economic crisis is enormous. It will take ALL of us, rich and poor, conservative and liberal, black and white, to fix this.
We must all start tugging on the same end of the rope.