How to Stimulate the Economy — Another Great Idea
Monday, April 6th, 2009
By Mitchell Clark, B.Comm. for Profit Confidential
— by Mitchell Clark, B. Comm.
I love the idea of the flat tax, as I’ve written previously. To me, it represents the single best idea for fiscal policy stimulus. Current monetary policy stimulus (reduced interest rates and a massive increase in the money supply) is somewhat helpful, but it isn’t really effective when you have a crisis of confidence. This is what the current recession is all about — a crisis in confidence.
I’m absolutely convinced that the single worst thing the government can do is to get involved in running businesses. It doesn’t work, it can’t work, and it just doesn’t make any sense. But, I’m also convinced that the government can play a useful role in creating a helpful economic backdrop that helps end users. End users like consumers and taxpayers.
Speaking of confidence, I know a fair number of people who want to go out right now and purchase a new car. But because of the economy and the constant bad news about the economy, they’re scared to go out and spend the money.
So, after the flat tax (which I don’t think will ever happen), another great idea to get things moving again is some sort of cash for clunkers incentive to get the automobile industry back on its feet. It’s working in Germany and I’m convinced it can work here, too.
The automobile industry is so pervasive throughout our society (because that’s the way we like it) that it is definitely an industry that’s worth helping. We don’t need to go in and bail out bad business models, but a government incentive program like a scrappage bill would provide enormous incentive for people with the money to go out and purchase new cars. To me, this is one of the easiest and most practical policy choices that would immediately stimulate the economy. We all know that, when business is good, the economic spinoffs from car-makers are enormous. Offering cash incentives to trade in old vehicles for new is a smart way to get people back in the showrooms. It’s also a great way to jump-start the green economy by providing more incentives for vehicles offering better mileage and cleaner emissions.
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Tags: Economic growth, economic news, economic recovery, rising interest rates
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
