Monday, March 09, 2009
Possible no-cost, effective stimulus? You be the judge.
At a dinner party a couple of weeks ago, I was having a conversation with a guy named Larry, who is a successful money manager. He sent a proposed stimulus package to President Obama’s people that I believe is a decent starting point for discussion. Here’s what he proposed:
1. Everyone can get a pre-charged Visa or Mastercard with up to half of their last year’s tax paid on it. People who paid little or no tax are allowed $1,000.
2. You must use it or lose it by the end of the year. Uses can be to pay off other credit cards or spend wherever the cards are accepted.
3. You pay it back within 5 years at 5% per annum interest.
The benefits, as he states, are:
1. People will spend money they don’t currently have available, or
2. Pay off higher interest debts, thus lessening their monthly bills
3. Money spent goes into the economy, creating jobs
4. The new jobs are taxed, so the country further benefits. In most States, this also results in State Income Tax
5. Money spent incurs Sales Tax, which helps States
6. After the Government pays at the most 2% interest for the money, it makes a profit on the deal.
7. To pay for the initial outlay, special Bonds are made available to potential wealthy investors, at the 2% rate discussed above. This is quite a bbit higher than any guaranteed, no-limit investment currently pays.
What I think:
I see little fault in this other than, it would be wrong for the country to profit on the interest from these loans. It would already profit from increased Income Taxes. So I would suggest decreasing the interest rate paid by individuals to 2%.
The benefits could be immense. The economy would be stimulated; employment would increase; Federal and State tax income would increase. The overall cost of the program would be zero.
What do you think?
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1. Everyone can get a pre-charged Visa or Mastercard with up to half of their last year’s tax paid on it. People who paid little or no tax are allowed $1,000.
2. You must use it or lose it by the end of the year. Uses can be to pay off other credit cards or spend wherever the cards are accepted.
3. You pay it back within 5 years at 5% per annum interest.
The benefits, as he states, are:
1. People will spend money they don’t currently have available, or
2. Pay off higher interest debts, thus lessening their monthly bills
3. Money spent goes into the economy, creating jobs
4. The new jobs are taxed, so the country further benefits. In most States, this also results in State Income Tax
5. Money spent incurs Sales Tax, which helps States
6. After the Government pays at the most 2% interest for the money, it makes a profit on the deal.
7. To pay for the initial outlay, special Bonds are made available to potential wealthy investors, at the 2% rate discussed above. This is quite a bbit higher than any guaranteed, no-limit investment currently pays.
What I think:
I see little fault in this other than, it would be wrong for the country to profit on the interest from these loans. It would already profit from increased Income Taxes. So I would suggest decreasing the interest rate paid by individuals to 2%.
The benefits could be immense. The economy would be stimulated; employment would increase; Federal and State tax income would increase. The overall cost of the program would be zero.
What do you think?
Labels: Stimulus
