Reviving the Economy - My way
Dont mind...but I think Mr. Barack Obama is doing a stupid mistake, just like his predecessor G.W Bush, by going in for a stimulus package. According to me this would not help the current ailing american economy. $815 billion is roughly equal to american consumers (maximum) monthly spending, and hence if the economy does not revive it would last for only a month. What Mr. Obama has to do is to make the money flow in the economy like earlier days. Being a capatalist economy, the US cannot survive without its citizens spending money. So how do we make people spend in this pitiful economy? I have an idea...read on
Il'll like to talk about a 2 step approach, based on the type of consumer:
1st the american salaried worker:
For all the currently employed workforce, excluding the ones that unfortunately lost their jobs because of the recent turmoil; the salaries have to be paid in 2 sections. Let me take an example: If Mr. Bob is employed and earns $3000 a month (take home), he would be paid $1500 in cash and the remaining amount $1500 in the form of a cash card. The cash card expires in 2 months, hence he is forced to spend that money within 2 months. The emphasis here is laid on the fact that in todays market the american consumer is refraining from spending money, and if americans dont spend money, there is no US economy. Although this might be the violation of democratic rights blah blah...but drastic conditions require drastic measures. So given the fact that if you donot agree with this, seeing the current economy, you might be the next one to get laid off, i hope no-one will disagree with this.
The advantage: We get the amount mentioned by Mr. Obama in his stimulus package in the market within a month. Mr. Obama, please spend that amount in some useful activities. The rule that a mentioned stays in effect till the economy has been fully recovered, irrespective of whether a person recently got his job or not.
2nd the american business owners: Now the next question is, there are only 50-60% of the entire workforce that are employed, rest all are business owners; How do we get them to spend? The answer is simple. Tax them at the rate of 70%, dont worry I am not against business owners, but suppose you paid 30% tax initially, now you pay 70% tax, the 40% would be refundable by the government in the form of a cash card, that expires in 6 months. You have the option of investing this money in the economy by recruiting new people, or simply loosing it.
I hope i have covered the entire mass of the US affected by this slump. If not, I am sorry as I am still a layman who does not understand market economics :). But yes, again my advice to the americans would be, go spend!! only you spending can revive this economy, its not me or Mr. Obama. The power is in your hands. Today cars, houses etc are at their cheapest, get a good bargain and move on with it, you would not get this opportunity again in the near future.
Thanks,
-Ashish
Il'll like to talk about a 2 step approach, based on the type of consumer:
1st the american salaried worker:
For all the currently employed workforce, excluding the ones that unfortunately lost their jobs because of the recent turmoil; the salaries have to be paid in 2 sections. Let me take an example: If Mr. Bob is employed and earns $3000 a month (take home), he would be paid $1500 in cash and the remaining amount $1500 in the form of a cash card. The cash card expires in 2 months, hence he is forced to spend that money within 2 months. The emphasis here is laid on the fact that in todays market the american consumer is refraining from spending money, and if americans dont spend money, there is no US economy. Although this might be the violation of democratic rights blah blah...but drastic conditions require drastic measures. So given the fact that if you donot agree with this, seeing the current economy, you might be the next one to get laid off, i hope no-one will disagree with this.
The advantage: We get the amount mentioned by Mr. Obama in his stimulus package in the market within a month. Mr. Obama, please spend that amount in some useful activities. The rule that a mentioned stays in effect till the economy has been fully recovered, irrespective of whether a person recently got his job or not.
2nd the american business owners: Now the next question is, there are only 50-60% of the entire workforce that are employed, rest all are business owners; How do we get them to spend? The answer is simple. Tax them at the rate of 70%, dont worry I am not against business owners, but suppose you paid 30% tax initially, now you pay 70% tax, the 40% would be refundable by the government in the form of a cash card, that expires in 6 months. You have the option of investing this money in the economy by recruiting new people, or simply loosing it.
I hope i have covered the entire mass of the US affected by this slump. If not, I am sorry as I am still a layman who does not understand market economics :). But yes, again my advice to the americans would be, go spend!! only you spending can revive this economy, its not me or Mr. Obama. The power is in your hands. Today cars, houses etc are at their cheapest, get a good bargain and move on with it, you would not get this opportunity again in the near future.
Thanks,
-Ashish
Comments
a) not quite sure forcing citizens to spend money is a long term solution. Short term, it might work, like the $300 checks sent out last year. But it DOES NOT WORK long term. just like $300 didn't work.
b) while it's true that American economy survives on consumer spending, (64% GDP is due to consumer spending), approx last 10 years have been about consumer spending money that it did not have. The saving for average consumer @ this moment is 3.4%, which while low, is better than -0.1% it had 2 years ago. Consumer is still spending, but just being a bit cautious. So this downward trend is healthy for long term.
middle class families can finally afford homes due to the housing correction.
Just my 2 cents.
3.4% makes a humongous difference when it comes to US consumer spending. But as I said forcing citizens for a while i.e. 2 quaters till the economy recovers, is not a bad deal. Instaed of spending unneccesary amount of money on projects that arnt currently required.
On a lighter note, The author himself is a big time spender. He himself has spent around $20000 in a single month.
Keep the suggestions coming
secondly taxing businessman will jeopardize the economy more... dont u think this would lead to lowering of production? if you want then read about great depression.. recession followed by lowering of production is very serious...
third.. the institutions which Obama is bailing out, viz - AIG, Citi is important.. they are of huge importance not only for the US but for the whole world.. if any of this falls then effect would be unprecedented..
Good to see you writing buddy... I am a frequent visitor to your blog!!
Cheers .....
Thanks for visiting the blog. I agree with you. But I have nothing against business owners and neither do I want them to cut down on production. Infact my intension is to force them into investing in Equity, human resource etc. Although I still am not a big proponent of the bailout; you can take the example of AIG and how they spent the taxpayers money in executive bonuses.
The money used for bailout bu Obama goes into: healthcare, umemp benefits, infrastructure maintainence etc. Do you really think he needs to spend in healthcare at this time? Do you think he needs to allocate a lot more for unemp benefits and encourage this? I think the only logical way to create jobs using the major chunk of the money in infrastructure. What say?