Tax Incentives do not create demand,
without demand there is no incentive.
Sean Lewis
February 13, 2009
(draft)
Once again many politicians are approaching the economy from the point
of view 'what is best for my constituents' and not what is best for
the Country!
Tax cuts to the rich did not stimulate the economy, if it had
stimulated the economy we would not have seen a doubling of the
National Debt, Record levels of Unemployment, contracting and finally
negative GDP growth, and record foreclosures and the collapse of Wall
Street.
What tax cuts to the Rich created was a culture of greed, privilege
and opulent grandiosity, obnoxiously detached from reality.
What is needed is a stimulus package that creates demand FIRST so that
there is incentive to increase manufacturing and hiring. Tax cuts to
business facilitates the expansion of business but does not create the
demand to do so.
For business to expand, there must be demand. Demand is created by
consumers spending and buying increasing levels of gods. If middle
class America does not have the disposable income to make these
purchases then it is up to government to temporarily fill the void.
The Stimulus Package needs three components to work. Generate
consumption of goods, create jobs and create a safety net floor for
the middle class.
Generating consumption of goods is important because it maintains the
demand for production which keeps businesses open and slows or
eliminates the number of those being fired.
Shovel ready projects pumps much needed money into State coffers and
creates jobs increasing GDP growth and renewing the cycle of GDP
growth. It also keeps State and Municipal workers employed!
Finally there is a need give aid to the middle class to slow
foreclosures and to supplement and replace the benefits that the
Unemployed have lost and put a floor on the fear so that deflation can
end and consumers are no longer fearful of spending.
Once these issues are addressed, then the next phase of the economic
plan can be addressed. This approach is best, bottom up rather than
top down. There needs to be demand for jobs before you give incentives
to create them. If the stimulus package is about facilitating growth
without first creating it, then it is a plan for failure.