Wednesday, December 02, 2009

Suggestion Box

Mark Thoma generally discusses the Jobs market incentives which the Government can adopt. The key element to remember must be that the Private sector will not undertake Job generation under the decline of Consumer Demand. Nothing will alter this fact except Government activity. Mark explains some of the methods that this Government activity can take, though he ignores the punitive action of specific taxation. There can be a major impact by making downsizing expensive. This would entail things like forced Severance Pay of excessive amount, payment of medical insurance for the eliminated Worker plus his family for a specified period, assumption of relieved Worker’s debt obligations for a specific period, or payment to the Government of a set amount of projected Welfare Costs for a released Worker. Does all this sound like Communism? It might seem so, but One can establish that in some way, all these generated Costs are the responsibility of a negligent industry. I am not advocating any of these efforts per sec, but simply attempting to outline the scope of economic policy which could be adopted.

Read this article, and ask if it is Government which should be the primary funding agent for economic recoveries. We would not be discussing the hazards of Government debt, if We made the decision to force the Private sector to fund their own recoveries. We could be in need of a Transportation tax, which charged each business a Ton-mile charge for transporting Goods and Materials. We could accept a Profits tax, which charged 10% of all gross Profits, which would be contributed to a Fund utilized as a Credit Union; but have the mandate to pay Worker salaries past Lay-off for a specified period based upon previous years of labor service–extending from a few Weeks for new Workers, to several months for older laborers. It is exactly these in-place instruments which could generate recovery from Recession, and forestall much Government expenditure for economic generation at least in the early stages of recovery. This is all using the Tax Code, but not giving Business a free pass, but are We back to calling it Communism?

I basically agree with Charles Plosser, never believing that the Fed could act in any role of stimulation with the economy. We need to tighten up the amount of Cash within the economy, or face real un-retractable Inflation; the real role of the Fed policy. The expansion of the Fed role in the economy, especially the purchase of distressed assets, can only lead to long-term complications; none of which We would like to face. I do not agree with Plosser’s expectation that the Unemployment level will begin to decline though, not without some of the activities mentioned above. Government must take an Activist role, but not one as Chief Consumer. lgl

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