Wednesday, January 23, 2008

How to Stimulate the Economy

Everybody but me is talking about how to avoid a recession, ASAP. Here is my plan:

The Congress should look at the social service proposals offered but not adopted during the last two years, e.g., health care for low income children in the US. Programs that seem most feasible, say, those most needed and those that could be implemented most quickly, should be selected for immediate passage, up to full employment. This would constitute an immediate increase in GDP. If those are not sufficient to achieve full employment, other programs such as universal pre-school could be added. An alternative would be not social services but work on infrastructure, e.g., roads and bridges.

The other kind of program that would be most stimulating would be a negative income tax, i.e., payments from the IRS to Americans who have no income or income only below a specified figure. This would be similar to the Earned Income Tax Credit except that it would be only for those not employed.

Immediate staff work would be required to determine as well as possible how much of any such program would be adequate to avoid or reverse recession. Also under consideration from the start should be which of these programs and/or how much of each should be made permanent.

There would be many fortunate by-products of such measures--to be considered at another time.

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