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OpEdNews Op Eds    H3'ed 3/16/20

A Proposal for Real Coronavirus "Stimulus"

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On March 12, the New York Federal Reserve announced a $1.5 trillion injection of money into the US financial system. Three days later, it cut its benchmark interest rate to zero and announced it would be buying at least $500 billion in government bonds and another $200 billion in mortgage securities.

The Fed is returning to a policy of "Quantitative Easing" in response to the COVID-19 panic. The idea behind these moves is that throwing money at the banks and the government will "stimulate" the economy by keeping credit easy for consumers and business borrowers.

I have a better idea.

The Fed's new QE announcements already top $2.2 trillion.

For Fiscal Year 2018 (the year your last tax return covered), the US government only collected $1.6 trillion in individual income tax.

The projected amount for Fiscal Year 2019 is probably more than that, but not a great deal more, and almost certainly not as much as the Fed is already planning to throw into the mix.

If the US government is serious about "stimulus," it should announce that instead of accepting tax returns this year, the IRS will immediately (no waiting for April 15, no questions asked) cut and mail refund checks for every dollar of income tax it collected in Fiscal Year 2019.

Instead of the Fed magically creating a bunch of new money out of thin air and giving it to banks and the government, just give Americans our own money back.

We'll take that money to stores and buy things with it (that's "actual economic demand"), which will stimulate the economy a whole lot more, and a whole lot faster, than the Fed's magic money sitting in bank balances waiting to be loaned out (that's "prospective economic supply").

Yes, my proposal would result in an even bigger federal budget deficit this year than usual, adding more to the government's debt. But that was going to be the case even before the coronavirus. And both major American political parties have made it clear -- in action even when they don't admit it -- that they don't believe deficits matter.

If the COVID-19 panic is the economic equivalent of a heart attack, and that's pretty much what it is, the Fed's response amounts to slapping the patient's face and urging it to wake up while praying loudly and fervently.

Actually putting people's tax money back in their pockets would be the equivalent of a direct adrenaline injection to the patient's heart.

 

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Thomas L. Knapp is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.


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5 people are discussing this page, with 11 comments  Post Comment


Rob Kall

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Comment by Rob Kall:

I can see doing something like that for people with incomes of say, $80,000 or less. But it would be insane to do it for everyone.

Submitted on Monday, Mar 16, 2020 at 4:39:34 PM

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Not really. If deficits don't matter, they don't matter. And if the goal is to get the economy going by stimulating demand, people who make over $80k spend money too.

Submitted on Monday, Mar 16, 2020 at 5:18:06 PM

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This is speculation, but my guess is not that many people in the top income bracket earn a regular paycheck with automatic withholding anyway. How much do you suppose Jeff Bezos would receive in withheld income?

It would be a windfall for me. I would probably put some of it into stocks at "fire sale" prices. Of course the unemployed wouldn't see anything. But your comparison of the cost of your proposal to what's actually being spent on "stimulus" is certainly valid.

Submitted on Monday, Mar 16, 2020 at 8:07:17 PM

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shad williams

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I would prefer the treasury give me the benjamin plates, the machine and enough paper to stimulate the economy in say a ten square block area...once a week for 15 years...yeah, that's the ticket.

Submitted on Monday, Mar 16, 2020 at 8:32:37 PM

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Dennis Kaiser

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At a time when we are told we must cut Social Security, Medicare, Medicaid, and any other program that supports at Americans (except the 1%ers who continue to bilk the government) we see our government giving Wall Street and the financial industry over $2.5 Trillion in the month of March alone!

It might also be mentioned this $2.5Trillion influx hasn't done a thing to hold up the market with the most recent influx of $700 Billion lasting 1 minute before the market had to be shut down for a "recess".

Meanwhile, we average taxpayers continue to get hosed with more to come in order to make certain the wealthy don't lose too much. It is horrible to think they might have to resort to pumping their own gas someday while having to drive themselves to get places.

Submitted on Tuesday, Mar 17, 2020 at 11:57:16 AM

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Dennis Kaiser

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Tulsi Gabbard's proposal of UBI to every adult for the duration of this crisis makes the most sense as it provides cash needed by all whether you lose your job or not as the gouging Capitalists are raising their prices in this time of crisis. The money needed for this would come from the same place as the money going to Wall Street and the financial industry thin air, but would actually cost less in the long run as what has been syphoned to the wealthy recently would be the total amount needed under Tulsi's proposal and would go into our economy, which bracing the market does not.

Submitted on Tuesday, Mar 17, 2020 at 12:09:32 PM

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Thomas Knapp

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Giving existing money back to the people it was stolen from makes more sense than creating new money out of thin air to hand out, not even counting the differential in administrative costs.

Submitted on Tuesday, Mar 17, 2020 at 12:11:26 PM

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A Gabbard administration would be for the people. That's why they are making certain her word doesn't get out.

Submitted on Tuesday, Mar 17, 2020 at 2:03:52 PM

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Well, yes, a Gabbard administration would be for "the people," if we define "the people" as "Tulsi Gabbard and Narendra Modi."

Submitted on Tuesday, Mar 17, 2020 at 2:13:53 PM

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Yeah and maybe Assad and let's not forget the Russians. Meanwhile, let's get back to the MSM propagandists maybe they have more.

Submitted on Tuesday, Mar 17, 2020 at 3:36:42 PM

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Assad and the Russians didn't fund Gabbard's campaigns back when she was "Republicans' favorite Democratic hawk" and hadn't yet learned the "play the peace card -- hey, it worked for Trump" tactic. Hindu nationalists affiliated with Modi's BJP did.

Submitted on Tuesday, Mar 17, 2020 at 4:16:32 PM

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