The all-powerful consumer? Feh. Boost business …
My colleague, confidant and occasional kick-boxing sparring partner, the fantastic Felix Salmon is worried about what comes the Day after Tomorrow:
While previous recessions were part of economic cycles within a certain economy, what we’re going through right now is a painful disruption from that economy to something else. I fear that the flat or declining median wages, however, might well survive the transition — at least so long as unemployment continues to remain as high as it is now. Which is one reason not to worry overmuch about inflation: if consumer spending accounts for 70% of the economy, and consumers don’t have any money, it’s really hard for prices to rise very quickly.
Well maybe we should quit worrying about the banks and The Consumer and pay attention to a different sector of the economy (via another friend of mine and occasional kick-boxing sparring partner, Larry Kudlow):
So here’s a novel thought for all the geniuses down in Washington. Help businesses for a change. You can begin by stopping the taxing of overseas corporate profits. Do not hike the minimum wage. Back off cap-and-trade. Do not nationalize health care. Stop the anti-trust assault on phone companies, pharmas, Google, airlines, and multi-nationals.
And how about a six-to-twelve-month payroll-tax holiday? That would make it cheaper to hire new workers. What about a corporate tax cut? And immediate cash expensing for business-investment write-offs? In other words, cut the tax cost of hiring, investing, and doing business. Because it’s businesses that create the jobs and the incomes for families all throughout America.
And if you are still worried about the housing story or bank toxic assets, how about a capital-gains tax holiday?
Does anyone in Washington understand the way the world really works? It’s called incentives. That’s what this is all about. And we’re going to need many more of them if businesses, investors, and families are to start prospering once again.