In an attempt to stave off financial ruin and strengthen the
economy, Washington has invested more than $2.5 trillion in
the economy since 2008 in an ongoing series of bailouts that
continue to this day. $1.6 trillion has been spent on the
purchase of private-sector debt and mortgage-backed securities
from private enterprises and Fannie Mae and Freddie Mac. $330
billion was dedicated to insuring bad debt and risky
investments undertaken by those same enterprises. Over a half
trillion more was put into the expansion of lending to the
financial industry. It doesnít end there: Thereís still
another $10 trillion in promised support out there yet to be
There has been so much attention paid to Ė and so much money
thrown at Ė unscrupulous financial institutions that the
powers-that-be seem to have forgotten about the most important
part of our economy: the middle class. This has led to
well-deserved derision from the people. Every time Washington
has opened its wallet over the past 3 years, there has been a
collective cry from the masses: ďWhat about us?Ē
But, that question is a little disconcerting. We arenít
deserved of a bailout. No one is. Not the banks. Not the auto
industry. Not any one of us. Bailouts are a recirculation of
other peopleís money or the creation of debt. Itís wrong to
steal from Peter to pay Paul. Itís as equally corrupted to
saddle future generations with mountains of debt. So, we canít
think of economic salvation in terms of unlimited unemployment
benefits, tax credits, government-sponsored training and
stimulus packages. If free money was wrong for the banks, why
on Earth would it ever be right for us?
Instead of having access to other peopleís money, we need
access to our own money. Thatís the magical elixir for what
ails us. Weíve been told time and again that consumer spending
makes up 70% of our economy. So, it only makes sense that the
consumers be empowered to spend. To make that happen, we have
to put more money in the pockets of the middle class. We needs
tax cuts. Not gimmicky tax credits that require kids or
mortgages. Not tax cuts that have a defined sunset just a few
years down the road. No, we need honest-to-goodness permanent
cuts of reasonable size.
To start, it would behoove Uncle Sam to cut the tax rates (and
the accompanying federal spending) by 5 percentage points per
each bracket. That would put an extra $2,000 into the pockets
of a family that earns $40,000. A $100,000 household would
have another $5,000 to spend. That would put billions back
into the productive sectors of the economy (where it belongs)
which would incite the sale, production and transport of an
equal amount of products and services and, therefore, put
people back to work. Then, they too will spend.
Spending begets growth, which begets more spending and growth.
Itís elementary economics. Increased personal spending is the
very best way - the only way - to jumpstart the economy and
put people to work. Itís really that simple.
Why this hasnít been done is utterly confounding. The furthest
that Washington has gone with this recently is the temporary
suspension of a portion of the Social Security tax. That was a
flawed plan from the start because it was good for only one
year and it cut the revenues for a Ponzi scheme already
destined for bankruptcy.
Itís no wonder that the once-indestructible Barack Obama is
suffering from low approval ratings as the unemployment rate
lingers above 9% and families everywhere (both the unemployed
and the underemployed) struggle to get by. It has become
painfully obvious to even his most ardent supporters that the
man doesnít have a clue about what makes our economy work.
Neither does our equally inept Congress. Thereís little hope
for our economy until the political class can see the economic
value Ė and social importance - of the working class.