No, actually, there is a price to pay for Keynesian policies, but not at once. The current stimulative policy will eventually cause interest rates to rise and bring about another bout of a bear market (well within the long term scenario discussed here often enough), but in the short term, these policies work to heal current imbalances between the paucity of demand and the excess of supply. Frankly, if Congress really wanted to heal that problem, adding to the pool of investment through tax deductions to business (as is contemplated right now) will just exacerbate the oversupply problem.
If Congress might be interesting in listening again (it did earlier this year, when I suggested a refund to every tax payer of the same amount, but went only half way <g>), right now, if they want to inject about $100 Billions into the economy, they should simply change slightly the social security payment by reducing the overall rate of the combined "payroll payments" (Social security and medicare) by a full 1%, maybe 1.2%, and simultaneously recognize that these payments are really nothing but regressive taxes (when they no longer applies above $75,000) and partially offset this decrease in SS trust funding by making the Social Security earned income subject to Social Security payments, the same as medicare, no upper limit. That will release back into the economy about $100 Billions or so (half to companies no longer paying their half) and half to employees. To the extent that the SS trust fund is too depleted in two years from this change, then get back about half way, but leave the ceiling of on income subject to the payroll taxes. hey, even if they listen to me half way, that should be enough of a stimulus together with the other stimuli planned (additional defense expenditure, Airline packages, help to NY City etc.).
Zeev |
