The impending economic recession has become the #1 issue in the political campaign. It beats illegal immigration and has edged out the war in Iraq as the political hot topic. Lynette has rightly pointed out that the war in Iraq is the most important factor with the economy and you can't talk about one without talking about the other. The Old Media has refused to connect the two, most likely because it would change things from a 70% disapproval of the war to a 90% outrage of the war. If (I so wish it was "when") Americans learn that the reason oil is $100 a barrel and milk is $5 a gallon is because of the war, they are going to be more than a little pissed. The Old Media which supports the war and is trying to convince us that there won't be a recession will probably never connect the cause with the effect. They will continue to blame the housing bubble for what is happening and politicians will make their promises on how to fix it without mentioning the war.
Now that the economy is the #1 problem, candidates are starting to talk about it. What will the next president do to help us with this economic downturn?
Hillary Clinton: She is proposing a $70 billion jump start followed by a $40 billion tax rebate. The initial $70 billion would be used to help stop foreclosures (anyone surprised by the fact that the housing bubble is to blame?), help pay heating bills for people, start a program to end oil dependence, and increase unemployment insurance.
As I pointed out yesterday, this would all be new money from the Federal Reserve and as such would increase the inflation rate. She also doesn't mention the war in her fiscal plan.
Her plan would be about as effective as giving someone a Tylenol to deal with the pain of a gunshot wound. What it amounts to is nothing more than pandering to the middle class who are feeling the pain but don't understand how the economy works. A tax rebate sounds great! It will be ineffective and any money the middle class gets in the rebate will be quickly eaten up by inflation.
John Edwards: I haven't found as clear of a picture of Edwards plan but here's what I have been able to find out. He is proposing a $100 billion economic stimulus package that will concentrate a large part toward creating green jobs in an effort to end oil dependence. He wants to close tax loopholes for corporations and expensive incentive plans to make up some of the $100 billion. He isn't sure where he will get the rest of the money.
Edwards would immediately start deploying troops out of Iraq and back to the United States. Maybe that's why the Old Media is reporting that the Democratic race is between two people and Edwards isn't one of them.
I'd like to see the rest of his plan but if he were to follow through with this, it's better than Hillary's. It would be nice to know where he plans on getting the rest of the money too. Any new money created only makes the problem worse. Obviously, a lot of money will be saved by ending the war but that money can't really be directed toward the problem because it's a combination of new money and money borrowed from other countries. Still, bringing troops home will help.
Barack Obama: No plan. This has been the biggest complaint that I have heard about Obama. He talks about hope and change but it's all inspirational rhetoric. People want change. People want hope.
The Wall Street Journal said that Obama will probably announce some kind of economic plan in the next few days. He's going to have to. Hillary is already attacking the fact that Obama isn't presenting any real answers. As people start to really feel the economic pressure, they are going to want to move from hope to actual solutions.
Mitt Romney, John McCain, Fred Thompson: Tax cuts while increasing the surge in Iraq and possibly into Iran.
Do I need to point out anything else about this plan other than they are going to collect less money and spend more money? How can that possibly work?
Rudy Giuliani: He's been playing up a plan for tax cuts for corporations. Supposedly this will allow them to hire more people, creating jobs, which will boost the economy. Or maybe it will just help companies increase their bottom line or weather the recession easier. It seems like a very indirect and risky plan geared toward helping companies instead of people.
He also wants to continue the war. Can we create enough jobs to offset the cost of the war? Is it right to cut taxes to corporation so they can hire people so that we can tax individual income to help fund the war? Does swapping where we collect the taxes from increase the amount of money coming in to the government coffers?
Mike Huckabee: Huckabee is a strong proponent of the Fair Tax. He would like to abolish the income tax and the IRS and put in place a National Sales Tax of 23%. In better times, this would be a better plan than what we've seen so far.
The Fair Tax has lots of good things about it. There are no loopholes and you save money by shutting down a huge government department. By taxing sales, you also automatically catch people who are "cheating" the current system. Self-employed people that under-report their earnings, illegal immigrants, and drug dealers would all pay taxes. People who wanted to pay less taxes could buy less stuff, giving them some control over the system.
But these aren't better times.
Huckabee wants to continue the war just like the other NeoCons. If the Fair Tax was meant to replace income tax, it won't be enough money right from the start.
On top of that, the big selling point of the Fair Tax is that people can pay less tax if they cut back on purchasing. A lot of people will take that opportunity in the beginning. That will mean even less taxes collected when the government is already underfunded for everything that it's trying to do.
It would also put us more quickly into a recession. Two-thirds of the economy is driven by consumer purchases so any incentive for people to stop buying things will initially hurt the economy. Eventually people will learn to live with the tax and will spend normally but the knee jerk reaction will be to save money for the upcoming recession bringing the recession on earlier.
If we weren't in a war and weren't on the verge of a recession, the Fair Tax would be a much better answer than income tax.
Ron Paul: I'll be able to go into more detail with his plan because I understand it better. Some of what I'll be posting are what I see as possible results from the plan. Paul has outlined the plan but hasn't gone into all the ramifications of the plan, at least not that I have found.
First, bring the troops home. All the troops. He isn't talking about ending the war but ending America's world empire. Besides the war in Iraq and Afghanistan, we have over 700 military bases in 130 foreign countries around the world. To keep the wars going and all the bases operating costs the United States about a trillion dollars per year. We get that money by borrowing it from other countries like China and having the Federal Reserve create more fake money out of thin air (causing inflation).
The obvious result, as I said with Edwards, is an instant savings of money. We still have to pay all the soldiers and pay operational costs for bases in the United States and its properties so it's not an instant trillion in savings but it's hundreds of billions not being spent (the war is incredibly expensive).
Less obvious is the fact that all those people will be living in the United States. All those people that have been buying stuff in foreign countries will be in America buying stuff. Many of them are going to want houses. You want to end the housing slump? Bring all the military personnel home. They have to live somewhere. They'll buy houses and they'll buy furniture and appliances and TVs and on and on.
Step one is to immediately spend less money. Edwards and Ron Paul are the only ones that seem to understand this. We can't avoid or lessen the impact of the recession if we don't cut back on the money that government gets from the Federal Reserve.
Second, get rid of the income tax and the IRS and replace them with nothing. "How will we fund the government?" I have people ask me when I say this. The answer is that we don't. We force the government to cut back to where it can operate off of all the other money that it gets. The media paints this picture that our income tax funds the government. It doesn't. It funds part of the government but the government gets plenty of money from other sources.
The result of abolishing income tax is that everyone automatically has more money. Unlike the Fair Tax, there will be no incentive other than saving for a rainy day to not spend the money. It will be like a windfall of money for people. It would be a huge raise for people and in their glee, many of them would go on a shopping spree.
PTE Rick pointed out some time ago that the best way to stimulate the economy would be with a trickle up theory. Get money to people that are living from paycheck to paycheck and they will put that money into the economy in a meaningful way. They will get items they want or need while funding jobs for everyone else.
The United States collects about a trillion dollars a year in income taxes. If people saved or invested 10% of that and spent the rest, we would be pumping $900 billion into the economy. This makes Clinton's and Edward's targeted plans of a one time shot of $100-110 billion look downright feeble. $900 billion per year into the economy.
If we were in a recession, it would end just about instantaneously and we would enter into an era of real economic growth. It wouldn't be a fake bubble like the housing fiasco or the dot-com mess that was caused by people borrowing money to fuel the economy. This would be real money entering the system. People would feel like an incredible burden had been lifted from their shoulders and would celebrate by buying stuff.
Third, allow value-backed currency to compete with the Federal Reserve's fiat money. The Federal Reserve notes that we have now only have value because we have all agreed that they have value. In real terms, they aren't worth anything. They aren't even the I-O-Us that they were when they were created where you could return them and get gold. US dollars are an abstract idea that the world accepts as currency.
The Federal Reserve plays games with our economy to serve their own purpose. The Federal Reserve, despite its name, is not a Federal agency and does not answer to our government. There is no congressional oversight of the currency of the United States of America. Our government and our economy is at the mercy of super-elite bankers.
By allowing real money to be circulated, the Federal Reserve would be forced to be more responsible for its actions. If it continued to devalue the dollar, people would stop using it. They would put themselves out of business. Make no mistake, the Federal Reserve is a business and they want to make a profit so they would take actions to stay in operation. Right now, they have gotten the government to pass laws giving them a monopoly on what is allowed to be used to barter for products and services in the United States. That monopoly has given them the ability for a high level of abuse and it's costing the US citizens their livelihood.
The Federal Reserve dollar is said to be worth about $.04. Four cents! Imagine what would happen to the economy if the Federal Reserve reined in their policy and the dollar doubled in value. Prices would go down.
Put it all together and see what the picture looks like in your head. All the military personnel funding their lives in America, all Americans having more money to spend, and all of the purchases from both groups of people on items that cost less. With 66% of the economy funded by how much the citizens purchase, the obvious answer is to set up a system where people can afford to buy things.
So far, I have only seen one candidate that is willing to set up such a system. I have only seen one candidate that truly understands how the economy works and will take the actions needed to fix it. Clinton is offering a feel-good band-aid that will do nothing to change where the economy is heading. Edwards is on the right track with ending the war, closing tax loopholes, and fighting special interests that influence our government at the expense of its citizens. The NeoCons are economic idiots and can't be trusted to operate a garage sale, let alone the economic policy of the United States of America.
Ron Paul has spent his life studying economics and is America's best chance at avoiding or minimizing the oncoming recession.
