I typed a whole lot of numbers to link this piece, so the Readers can understand that the basic function of Stimulus proves a failure. Milton Friedman and Franco Modigliani were wrong about their ‘life cycle’ consumption, but only by length; there is a definite decade cycle which can be discerned–all based up expected Earnings from point of Income increase. Robert Barro gives additional material as to the lack of Gain from Stimulus. One has to understand that the current economic policies are costing an extreme amount of public funds, and retrieving little in terms of economic gain.
A degree of honesty must prevail at this time. All Economists and Business pin their hopes upon Investment, and I cannot understand Why. There is a remarked loss of Consumer Demand–both total Consumption and in sector consumption, especially that which is dependent on Name branding. Truth would say that is already too many vested businesses, with too much Production capacity, with too few Sales. The vested businesses are building up too much debt, and additional Start-ups would only increase the competition for Consumer dollars. Investment will only worsen these effects. We have whipped that horse to death!
I propose an alternate approach, where We re-introduce the concept of real business taxation. You hear uproar from Word one on this proposal, yet it was the traditional form of taxation back before there was even an personal Income tax. It has certain benefits which should be re-examined. The Consumer will not be censured for Consumption in money terms for his Expenditures, while business has to pay nothing without accumulating Profits. State and Local Sales taxation presents sufficient criticism of Consumer Spending, and We need Consumers to feel affluent. I will suggest that personal Income taxes be reduced by 10%, Capital Gains taxation returned to 22% for Now, and business taxes permanently increased by 10% across the board. It is bound to anger all sorts of officialdom–Private Sector, Government, and Academia. Still, it may be the way to restart the economy. lgl