This may be the most rationale argument for current Fed policy which I have read, but I disagree with it in total. My position flies in the face of decades of Keynesian analysis, and I should give some Answer which is not simply denial. I have been trying to organize my Thoughts on this issue for some time; what is the best Guess Estimate of my success this time? Here are the present economic conditions:
Consumer Demand remains down but sustainable. Production Schedules are set to meet the current Consumer Demand needs without unsustainable Price increases which would further decrease Consumer Demand. There remains massive desire among Business personnel to increase their Profitability, but almost no intention to increase Production levels without a visible increase in Consumer Demand; Business does not want reduced Prices to reduce their Profitability coming through increased Production and forced Sales programs, or do they want to add any Production Costs to their current Production. Business wants low Interest rates and Tax Cuts to maximize their Profits without resort to increased Production. They are not about to hire expensive labor, or perform massive Upgrades of Production facilities. They feel that they are in a stasis position where they can only lose their Profitability with Production schedule changes. The economy might need Stimulus to improve Employment numbers, but will achieve nothing by granting Business non-Production alternatives to higher Profits.
I would publicly call for elimination of the Bush Tax Cuts in total. Necessary labor which Business cannot deny would immediately demand higher Wages, cutting into Business Profits. The increased Taxation on Business would further reduce their Profitability. Capital Gains taxation would incite Investors for greater performance from Corporate structure. Business would be forced to shift their Production schedules to obtain the added revenues denied from taxation and Wage demands. Soft Consumer Demand would disallow Business increase in Consumption Pricing. Business would immediately seek lower-Cost Production labor to forestall the drain of labor from higher-Priced labor, who could devote their time to their most favorable Profits-making activity. Guess What?–I think We have restarted the economy. lgl