I had a simple notion to help ease the economic crisis. Instead of funneling endless amounts of public money to financial institutions in hopes some will trickle down to consumers and businesses, give consumers and businesses the money directly. And the mechanism to do this? Suspend the payroll tax for a year and pay Social Security benefits with some of the borrowed money now being shoveled by the ton into bank coffers. This would give an immediate 6.5 percent pay raise to all workers, and a 6.5 percent shot in the arm to the bottom line of every business.
I wanted to get this idea out. And instead of trying to reach policy makers, I went to the people they go to for their ideas–think tanks. And lo! I got some responses. It turns out this idea is already under discussion in thinktankland. But there are concerns about such an approach, Namely, that consumers might not spend the extra money they get but save it or pay down debt. And business might not use the extra money to hire people but just to improve their cash flow situations.
Such objections illustrate the tragedy of letting economists set economic policy. These worthies think only in economic terms. They only try to figure what economic objectives might be realized with what policies. When the challenge now with the economy is as much (or more) political as economic.
The economy is going into the tank. Nothing, absolutely nothing, can prevent this from happening, with all the horrid results this portend. The question now when it comes to government actions is whether Americans will see their government as being on their side in this sinkage, or just bailout artists for banks and financial institutions. Whether government cares about Wall Street or Main Street.
Whatever the economic upshot of a payroll tax holiday, it is a populist approach. It says your government is helping you–directly, without banking intermediaries skimming off the top. While the present approach of the Paulson Gang looks like bankers-helping-bankers.
The New Deal in the 1930s didn’t bail out the economy. WWII did that. What the New Deal did was prevent a social revolution in this country. Washington seemed to care about “the little guy.” And the little guy stuck with our present form of government.
Economists don’t seem to understand this. At least the ones now setting government economic policies in this country. If a new batch doesn’t tumble to reality soon, God help us all as things continue to deteriorate.Click here for reuse options!
Copyright 2008 The Moderate Voice