There is only one immediate response that will turn the tide that I know of.
The US Congress can declare a ‘tax holiday’ and lower the ‘payroll taxes’ (social security, medicare, payroll deductions) at least temporarily to 0%.
This tax is currently killing about $80 billion a month in aggregate demand- about $1 trillion per year.
This would IMMEDIATELY add maybe 5% to GDP.
The financial sector is immediately supported as the increase in after tax incomes allows workers to make their mortgage payments and pay their other costs of living.
This is ‘trickle up’ economics at work.
Politically, it would look like this:
Rather than Congress taking $700+ billion from taxpayers (and removing that much aggregate demand) and allocating $700+ billion to buy securities from the financial sector which adds no aggregate demand), and hoping for this to somehow ‘trickle down’ to the real economy.
Congress instead lets workers keep their $700+ billion so they can make their mortgage payments and support the real economy as the funds ‘trickle up’ to the financial sector.
There are no ‘scare resources’ causing this financial crisis and slow down.
It’s a purely ‘nominal’ event that’s causing the problems.
That’s why a ‘solution’ is necessarily ‘easy’ and immediately executable.
All we need to do is change numbers on spreadsheets.
It is only a vote to change those tax rates that is separating the world from an instant return to prosperity.
And once again that vote probably won’t happen due to the absurd myths about government deficits that should have fallen by the wayside decades ago.
Warren
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“The US Congress can declare a ‘tax holiday’ and lower the ‘payroll taxes’ (social security, medicare, payroll deductions) at least temporarily to 0%. ”
Hold up Warren, my granny is out spending money on casino cruises and expensive reastaurants and new cadillacs because she knows “worker slaves” are out paying taxes and making her social security solvent, if we do what you are proposing my granny may get scared and stop spending, and I KNOW PERSONALLY several congressman who are very very scared if granny and friends stop spending. Trying to educate granny about bowling score is a waste of your breath, all she knows is that workers pay taxes into social security so she feels OK to go spend her gubbment check, but if SS tax on the worker slaves is suspended, she won’t go spend. All your ivory tower THEORY is great and I love you for it Warren, but when the rubber hits the road with uneducated sheeple, grannies, and congressman, theories fall apart, one good thing about the new bill is that they subsidize people who ride bicycles. Let the REAL ECONOMY slow down, I want the ice caps to come back in alaska and the fresh air to come back to china and the slow pace of life to come back to the virgin island beaches, trust me Warren, you do not want 5 million tourists crowding your beaches in the name of growing aggregate demand. The garden of eden was PARADISE because there weren’t a lot of assholes like me there telling your daughter to drop her panties and let me get some, be careful what you wish for.
And who was the lobbyists that got the USVI RUM tax through? I don’t get it, I thought this was a FINANCIAL CRISIS, how did we have time to slow down and put USVI liqour tax PORK into this bill? LOL! Not that I am complaining since I will soon be your neighbor and we can drink lots of tax free rum together on the beach.
regarding the tax holiday you missed the part that says that congress will resolve that all promised soc sec payments will carry the full faith and credit of the US govt. regardless of the trust fund balances, which is all granny really wants
hear anyone at united airlines complain when the govt guaranteed their pensions?
Your granny aint like my granny, my granny and grandpa has always said they had their farm STOLEN from them in the depression and they don’t care squat about no bankers or gubbment types gauranteeing them anything. Its a long story I could go into.
“will carry the full faith and credit of the US govt.”
LOL! If you watched cspan when congressman la tourette tried to ban some of the silly PORK – barney frank and friends got really really mad at him when it was suggested the US gubbment might have its credit rating downgraded (LOL like the credit ratings aren’t rigged). Really whats it matter, US states defaulted on debt during the hungry 1840’s, Dickens even wrote about this in his original classic, A Christmas Carol where scrooge’s fine british assets were turned into worthless american securities, the world bounced back – no big deal. I even remember reading one time 2 us diplomats were sent to Rothschild in europe after we defaulted on some stuff and he told them to go back to the president and tell them they had spoken to the top banker in europe and the USA wasn’t getting any more money. Why all this stress over the USA keeping it’s credit rating, the world will go on if it doesn’t, no big deal, I will still put my pants on one leg at a time.
Those congresspeople in Alabama – especially senator bennet are not liking what those big city slickers are doing – we are having HUGE class warfare in congress right now amongst certain congressman.
You bring up an excellent point about pensions, a employee at WAMU told me that lots of CEO’s are stealing the pensions and using funny accounting to get their golden parachute and leaving the pension funds empty for the PBGC to save, that PBGC gonna have to do lots of mark to marketing type accounting to gaurantee the tide of claims coming to them eh? I already have seen lots of seniors stop spending allready Warren because they are worried gubbment promises going to be broken – that was before this crisis, all this uncertainty can’t be good for granma and grandpa.
Yes, lots of people have been scared into not spending- all the more reason for the payroll tax holiday asap.
and not that it matters, but i recall it was ohio that defaulted in the 1840’s, not the federal govt.
the federal govt defaulted in the 1930’s when it changed the amount of gold a dollar could buy from the US govt. the ratings agencies called this a default as the value of bonds went down relative to the promised gold. that’s the only federal default i know of.
seems they could have done this again in 1971 when convertibility was completely eliminated.