From the Wall Street Journal:
Five years ago today, President Barack Obama signed the American Recovery and Reinvestment Act into law. The $830 billion spending blowout was sold by the White House as a way to keep unemployment from rising above 8%. But the stimulus would fail on its own terms. 2009 marked the first of four straight years when unemployment averaged more than 8%. And of course the unemployment rate would have been even worse in those years and still today if so many people had not quit the labor force, driving labor-participation rates to 1970s levels.
It might seem like old news since everybody knows the recovery act was a terrible failure, but what needs to be remembered is that the money actually went somewhere, it's just that it went to well connected cronies and into the pockets of the wealthy.
But what is perhaps worse than all of that is the reality that no one, and I mean no one seems to have a plan or an idea that will save us from catastrophe. I have a plan, and a good one, but damned if anybody ever wants to listen to reason.
Right now we are an economy of consumers with most of our products being made overseas. That means the money you spend on foreign made goods is going out of this country and not coming back.
Our economy is a "circulatory system". When a manufacturer sells a product he pays his workers, distributes his profits to his shareholders and sets aside a certain amount to be spent on improvements or business expansion. The workers then take their paychecks and spend them in our economy. That in turn pools money into the local grocery store, the local car dealership or that money pays the local carpenter to add a deck onto the worker's house. In turn the grocer has money to spend on new flooring, on advertising, on parking lot expansion. The car dealer makes money which he in turn spends on a new house. The carpenter buys lumber from the local lumber yard improving the bottom line of the lumber dealer and on and on and on the money in circulation in our nation passes through any number of hands and improves the life and the prosperity of us all.
But when the money made by a foreign manufacturer comes in, it gets spent in that country, not ours. The workers may be subjected to near slave labor conditions in that country and thereby unable to improve their own economy, but regardless, the money leaves America and does not come back, except as a loan to us, a debt we are required to pay.
The solution to our economic problems may lie in a very simple policy change, one that doesn't increase taxes at first but will in the end increase revenues thus alleviating our dependence on borrowed money.
Not all foreign manufacturing is being done by foreign owned companies. Many of the jobs which have gone "off shore" are jobs in foreign plants working under contract to supply goods to American importers. And in some cases, the companies that used to make goods in America are now making them elsewhere.
If the Federal Government would give a tax credit to any company equal to 100% of the wages paid to workers for every job now being done overseas if that job was brought home to America, think what that would do.
First, the foreign companies are not paying taxes here anyway, so giving them a tax credit is a net zero impact on revenue.
Second, the tax credit could be phased in over a five year period and tied to the requirement that the jobs be maintained for five years in order to get the credit.
For every job brought into the USA a worker would get a paycheck that is now going to somebody in another country. That paycheck would be taxed as always and thus the government would be receiving revenue from a source that currently does not exist.
In addition the earnings would be put into circulation in our country. Those earnings would not only improve the prosperity of the workers, but as they spent that money in our own economy, they would lift all boats along the way. And as things currently exist, as that money circulated and became income to more and more people as it traveled around in our economy, it would generate revenue at many stages along the way.
Over a short period of time a large number of people could return to work. This would lessen the economic burden on the government at the same time as revenues were increasing from the growing prosperity. Because manufacturers would be free from heavy corporate taxes this would provide an incentive for companies to find America a friendly environment in which to do business. In addition, free from heavy taxes due to the tax credits, companies could keep prices competitive with foreign produced goods particularly adding to our nation's awareness of how despite our current racial tensions, we are still supporting slavery around the world.
With more and more jobs being created, with prices more competitive due to the favorable tax environment, with more revenue pouring in at the same time as entitlement costs are going down, an aggressive Congress might see enough light at the end of the tunnel to begin a serious plan to balance the budget.
Over time as the notion of tax cut incentives improving the overall economy caught on the opportunity for more people from other countries to come here and participate in our prosperity could add many more people to our consuming public all living here rather than in some other nation, spending money there.
The plans for fixing our nation's bleak outlook isn't as hard as some might like you to think. But it is very difficult when you have Barack Obama, Harry Reid and their democrat friends in power who are pulling us in the opposite direction, increasing the cost of government, increasing unemployment and incorrigible when it comes to talking about any form of tax cut or credit.
Is my idea workable? Might it succeed? Others can make that decision on their own. But one thing is clear.
We are not going to get out of this rut until we remove Barack Obama, Harry Reid and the progressive liberal democrats from power and the start of that juggernaut begins this year.
God help us.