Thinking Like A Conservative to Save the Economy

by Joel Hirschhorn
http://www.delusionaldemocracy.com

Admittedly, I have always seen myself as a fiercely independent voter and citizen. But because I was a professional public policy analyst for many years, when I worked for the US Congress and the National Governors Association, I can place myself in the position of a Democrat or Republican, liberal or conservative. During the current political storm with political hyperbole swirling around the economic meltdown, I find myself questioning what the Obama administration and the Democrat controlled Congress are doing.

Though I think there is incredible justification for strong government action to help a terrified and pained public, the basic strategy of spending enormous sums of government money it does not have but must borrow and burden the future with seems worth doubting. Especially when nearly all the spending seems to be going directly to companies and institutions rather than directly to citizens. I see a difference between bailouts and direct assistance to people hurting through no fault of their own.

So, here are some ideas for more conservative oriented approaches to strong government action.

Help those households that still have one or more people with jobs (or under-employed with low-paid jobs) increase their financial security and discretionary consumer spending. First, no doubt the most direct form of smart government action is to immediately cut their taxes, including payments for social security and Medicare. Second, provide a new type of income tax deduction for virtually all medical related spending, without any requirement to exceed a specified fraction of adjusted gross income. Third, immediately cut the federal tax on gasoline, of particular benefit to the lowest income households.

Help those households with one or more people who are unemployed. One big option is to provide financial assistance to get the education or training to qualify for jobs that still exist in this awful economy by providing direct long term, very low interest loans for both tuition and living expenses. No repayments would be required until a new job is obtained. The government could easily identify those jobs that really do need more well qualified people, such as nursing and other jobs for which foreign workers are being granted easy access to the US, and for which illegal aliens are being used in large numbers. People who have received unemployment benefits should be given preference for newly created jobs related to government financed infrastructure projects.

Help small businesses lower their costs so they can lower their prices to stimulate consumer demand and also maintain or increase jobs. This requires a major reduction in taxes of all kinds. In fact, tax reductions should increase for each new job created, and even more when companies provide on-the-job training for people without prior experience in those jobs. And larger reductions should be given to those small businesses that export their products.

In contrast to pumping billions of dollars into banks, that only 39 percent of people favor more bailout money going to, with the hope that this will provide more credit and more affordable mortgages, the government could immediately require all banks to lower home mortgage interest rates to 4 percent or less for every type of mortgage, both adjustable and fixed. This is a simple and fair way for recovery in the housing market and for curbing foreclosures. All existing mortgages could be automatically adjusted without any additional paperwork required. Similarly, small business loans and lines of credit could also be established with such a low interest rate, with preference given to companies that have had to reduce their workforce and companies attempting to start a new business or expand an existing one.

Another way to simulate home buying which is now dismal despite the highest level of home affordability in a long, long time is to offer for just one year a refundable tax credit of 10 percent for any home purchase. This could jump-start the extremely sluggish purchase of both new and existing homes as people with a deflationary mindset think it is better to keep waiting for still lower home prices.

To help consumers the federal government should also take forceful steps to open up the pharmaceutical drug market to competition from lower priced foreign made drugs, make it easier to introduce generic versions of brand name prescription drugs, and sharply curb the ability of drug companies to deduct advertising costs as a business expense which greatly increase the costs of brand name drugs heavily promoted through endless commercials and ads.

Considering the enormous numbers of American workers that would be devastated by the closing of US automakers it is important for the government to act. But not just by pumping billions of dollars into the same incompetently managed companies. Only 22 percent of people want more money going to Detroit's Big Three according to a recent survey. The government should be having serious discussions with the successful foreign automakers already making cars in the US on how they could take over the big three American carmakers. This could be a condition for government assistance. And all such assistance should be accomplished through stock ownership, which could return money to taxpayers if companies like Toyota took over the management of the American companies. To stimulate consumer demand the government should immediately provide a substantial refundable tax credit for new car purchases, increasing in proportion to the price paid, say from a minimum of $5,000 to a maximum of $10,000, and this credit should be available to use gradually or in total over a five year period.

Needless to say, providing major tax cuts and credits must also be accompanied with large cuts in federal spending to strongly reduce the federal debt. Any type of spending that preferentially helps the finances of the wealthy and corporate class should be the highest priority, with special focus on removing government assistance to companies that export jobs and import raw materials. All no-bid and sole-sourced contracts should be eliminated. Money spent by companies on lobbying or any form of political influence should no longer be allowed as a business expense. All congressional pork projects should be eliminated.

For example, the recent spending bill passed by the House contained $8 billion for more than 8,500 pet projects favored by lawmakers. It is abundantly clear that both Democrats and Republicans in Congress have not learned their lesson and are still behaving reprehensively. Will President Obama have the integrity to veto this spending bill containing massive congressional earmark pork projects? All signs are he will not. That is more than a disappointment. It is a disgrace, considering the many promises Obama has made. It will lower his credibility to that of Congress.

Article submitted Monday, March 02, 2009 & read 233 times.

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