Expansion of Government - The first problem with the stimulus bill is that it appears primarily designed to grow government. As this is one of the issues I have taken the GOP to task for, I'm not about to give the Democrats a pass. In essence, the expansion of government's role and powers requires a limitation pf personal freedom and liberty. And while there may be times it is necessary to do so to protect the country (war measures), any abridging of the rights of one individual for the benefit of another (wealth transfers) must be fought.
Expansion of Debt - A large part of this current crisis (as it was in 1929) was the excessive buildup and use of credit. To combat the Great Depression, a host of deficit spending was deployed. The same was done for WWII. But we still knew we had to pay these things off. Another facet of the problem is that programs from the Depression that are still with us today (Medicare, Social Security) are now major parts of the mounting debt. And unbridled spending over (I can't believe I'm going to say this) the last 8 years (shit), with no effort to achieve a balanced budget (last achieved under Clinton and the GOP congress) has proven to weaken the government's ability to deal with the crises we are facing. Unless we spend more: $750 billion for the Wall St (Dastardly Bastardly) Bailout, $2 trillion (with a "T" folks) for the FED's bailout attempts, another $1 trillion for Porkulus. The rationale that continuing to increase debt to save the country is beginning to look endless. It risks completely devaluing the dollar, nationalizing whole industries, and perpetuating further spending to maintain. In other words, it's a dead end.
Desperate times call for radical plans. Nothing is not an option, as politicians can't do nothing and get reelected. My preferred method (the FairTax) will take years to bring online. And while I don't have too many firm numbers (do to my lack of desire to look them up), a principle-based approach to creating the conditions needed to recover the economy is our best hope. Here we go:
1. Across-the-board Tax Cuts: To inject money into the economy, we need to reduce all tax rates. That is both corporate tax rates, personal tax rates, and immediate suspension of Medicare and Social Security deductions, for both the individual and business contributions. The distribution of the tax cuts would be this: 50% decrease for the bottom two brackets, 25% for the middle bracket, 20% for the upper bracket, and the top bracket is reduced by 15%. Corporate taxes are also cut by 25%. (note: these numbers may require adjustment after 6 months depending on the size of the deficit). The Medicare ad SS deduction suspension will be a 6-month temporary measure. All others will be permanent.
2. A Freeze on Government Spending: As I indicated, debt is our enemy in this recession. To combat this and to enable the tax cuts, all federal spending will be immediately frozen at 2008 levels. All government wages will be frozen at current levels. Non-essential hiring will be put on hold. And while cutting the numbers of people on the employment roles of government is a long-term goal, adding government people to unemployment would exacerbate the problem. Also, transfers of monies from Washington to other countries or states will be reduced by a minimum of 25%, or suspended entirely (as I don't want this post to take a week and become a book, haggling over those numbers would be part of the minutia of the plan). The only exception is unemployment. And regular hours for all employees (except critical services) will be reduced to 35 hours, with no overtime.
3. Military Spending: We need to cut a minimum of 10%. Yes, I said cut the military. What that means is closing bases around the world that were set up during the Cold War unless the countries that we are located in will cover at least half of the cost for maintaining those bases. Surpluses, especially those that are outdated technology, can be sold off. The only exception to this are active combat areas. And in the case of Iraq, they are now in the position of being able to cover our costs in their country. We now have the capability of maintaining and deploying worldwide with carriers and aircraft. So lessening our worldwide footprint will save us money and maybe avert some of the popular sentiment against us (although we'll still have to kill terrorists by the bushel).
4. Social Security and Medicare - The fastest way to cut a large chunk of cash out would be to kill these programs. But the chaos that would ensue would be nightmarish. So there's two short-term things that would help immediately. First, for Social Security, add one year to the retirement age, effective immediately. Add some others in there as well for us younger folk. But if you cut out all the people who are going to hit the roles this year, the savings would be spectacular, and buy us some time to catch up. As for Medicare, I had to do some quick reading, and as a result I have no clue where and how to trim this beast (any suggestions would be nice). But I'd say a 5% cut would go a long way.
5. Unemployment Spending - Because we are dealing with a large number of people unemployed at this time, and the number will grow, this will be the one thing government will continue to fund at whatever levels are necessary, for the next 18 months.
That's it. Other than the unemployment insurance (a necessary evil) and the number of government employees (which means they can do something other than live off unemployment), nothing is sacred. And desperate times call for hard measures.
The Principle - For 80 years, we've been increasing the amount government invests in the private sector, to the point that every other person and/or business is looking to Washington for a bailout. The inherent danger is that we will continue to become dependent on the largess of government. And eventually, there will be no private sector.
This crisis is the result of irresponsible debt accumulation (supported by government), continued adjustment (by government) to avoid the effects of a down economy in order to keep growing, and a fundamental shift in the American population toward a more socialist model of government. However, to maintain some semblance of freedom and pull the economy out of the sewer, we must empower the private sector to get back on its feet and grow, and we must free government from its inappropriate level of involvement in our economy. Then they can serve as the regulator rather than the command structure.
One other thing jumps to mind. Private industry is about getting the most bang for the buck. Government, on the other hand, is among the most inefficient manager of money there is, because when they need money, they take it (or make it). The secret to this crisis is to increase spending in the private sector, not the government sector. And it's not in government injections of money. The TARP bailout showed how quickly government doling of money can go wrong. So that's to be avoided.
Now, I don't guarantee that this plan will magically stimulate the economy. Only a complete idiot would say that. But this plan is the best hope we could have, and the best thing I could come up with between work, kids, and playing my shiny new bass. So if you have any additions of numbers on which I can adjust the few numbers above, I would appreciate it.