There is only one immediate response that will turn the tide that I know of.
The US Congress can declare a ‘tax holiday’ and lower the ‘payroll taxes’ (social security, medicare, payroll deductions) at least temporarily to 0%.
This tax is currently killing about $80 billion a month in aggregate demand- about $1 trillion per year.
This would IMMEDIATELY add maybe 5% to GDP.
The financial sector is immediately supported as the increase in after tax incomes allows workers to make their mortgage payments and pay their other costs of living.
This is ‘trickle up’ economics at work.
Politically, it would look like this:
Rather than Congress taking $700+ billion from taxpayers (and removing that much aggregate demand) and allocating $700+ billion to buy securities from the financial sector which adds no aggregate demand), and hoping for this to somehow ‘trickle down’ to the real economy.
Congress instead lets workers keep their $700+ billion so they can make their mortgage payments and support the real economy as the funds ‘trickle up’ to the financial sector.
There are no ‘scare resources’ causing this financial crisis and slow down.
It’s a purely ‘nominal’ event that’s causing the problems.
That’s why a ‘solution’ is necessarily ‘easy’ and immediately executable.
All we need to do is change numbers on spreadsheets.
It is only a vote to change those tax rates that is separating the world from an instant return to prosperity.
And once again that vote probably won’t happen due to the absurd myths about government deficits that should have fallen by the wayside decades ago.
Warren
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