Here is an individual with the correct ideation, but the wrong expectations. He remains correct about the behavior, and the mechanisms, of the players in the market. His solution set, though, will not alter the matrix of the Equilibria. Nick suggests that there are sticky expectations which there are; but then, he outlines How to pay the participants for their sticky play. What is needed is reward for abandoning the Status Quo. Translation: you make it costly to stay in a static position. I would revoke the advantages of the Bush Tax Cuts by elimination of the Tax Cuts entirely, and then feed them a Carrot; like a Tax Credit of some magnitude if they can prove they contracted losses by lowering Prices below Production Costs within the United States, in order to clear the markets of backed-up surplus.
View my Statement and ask What is all means. First, there must be a backed-up surplus to gain access to the Tax Credit; business managers must maintain Production in order to establish the surplus–Inventories must grow–inciting Employment. Second, they must lower their Product Prices to a point where they have the capacity to simulate Dumping procedure. Third, their Prices must be sufficiently low that it both adds Consumer Demand and higher Sales, and where they can at least pretend that they are losing Money. Fourth, Consumers will quickly assimilate the ideation that they are entering a Buyers’ market, where early Consumption will more profitable than later Purchase. Fifth, due to the nature of the Tax Credit passage, business will be eligible for such assistance only for a short Period–the expectation is less than 2 years of taxable Income.
Business will only gain the advantage of such Tax Credit with immediate entrance into the program. I would call for a Sunset on such provision of two tax years! I would stay within the operational boundaries of the economy, and define eligibility to rest only upon Price reductions between 8-40%. The Minima would draw out all Inflationary pressure, the Maxima not forcing undue Deflation; cheaper Temporary Products inciting the greatest reduction, Intermediate and Long-term Goods of insufficient Turnover to incite Profits from Sales more than 14% lower than within the current economic markets. It is obvious such mechanisms can hardly be maintained more than once, and I would suggest a Credit arena of Loss plus 16% of Loss as the Tax Credit. The End-Goal here is to get Business to reduce their Profit per Product, with the Government replacing the Profit plus Advantage from other business Profits of the businesses involved. I do not believe than final Cost to the Government will equal the previous passed Stimulus package, and may actually increase tax revenues with repeal of the Bush Tax Cuts. lgl