THE SIMPLE SOLUTION TO THE CURRENT “GREAT RECESSION”

From Cam Mosher

The problem is unemployment. It is a vicious cycle that keeps the economy sluggish and companies afraid to expand and hire.  People have less money to spend, either because they are out of work, or fear for their own economic welfare in an uncertain environment.  The Keynesian ideology underlying the current attempts of the government to spur recovery through massive Stimulus Payments is destined to fail because it adds nothing to the economy, and creates large government deficits.  It did not really work to bring us out of the Great Depression (in spite of attempts to say it did!).  I don’t question that government deficits will result in any process of resolution, but the real solution is very simple: get people back to work in the private sector!

Here is how to do it quick and simple.

1. Cut taxes on business.  The simplest and quickest way to do this is to eliminate the nearly 7% employer matching wage tax on earnings for a period of, say, five years.  This puts 7% of wages immediately back into the business.  Much of that will encourage business to keep employees or rehire them.  Other of it will be invested in growth and production.
2. Cut taxes on wage earners.  The simplest and quickest way to do this is to also eliminate the nearly 7% tax on wages that goes to Social Security and Medicare, for the same period.  This puts 7% of wages back into every paycheck immediately.  Most of that will be spent on goods and services which will immediately spur more investment in growth and production.
3. The result will be a massive government deficit as Social Security and Medicare benefits continue to be paid, again to the private sector, which continues to spur spending, hiring, and growth.  But the resulting deficit can then be truly seen as an investment, as spending, hiring, and growth build the economy back, and increasing taxes serve to reduce the deficit.

Come on, folks, our Free Market System does work, if largely left to itself.

So what is the true role of government in a true Free Market System?  Government must serve as the Rule Maker (through an effective and statesmanlike Congress), and Referee (through an effective and impartial regulatory bureaucracy).  This is conservatism at its best.

Cam Mosher