Much debate has centered around the economic stimulus plans. There was a lot of criticism for Bush's plan and there seems to be a lot with Obama's as well. So I thought I would try my hand at my own plan. I have no desire to be President or part of Congress and don't pretend to be an economist but thought I would actually offer suggestions rather than criticisms.
MY ECONOMIC STIMULUS PLAN:
I have a 5 step solution to the car, housing, credit crisis, and economy struggles (vouchers, credit, loans to businesses, tax refunds) outlined below.
1. Vouchers are given to consumers by the govt for the purchase of a car from one of the big 3.
The money given to the American people would be based on a tiered income approach. Those making 25k or less per family would receive $10k (or another higher amount TBD). From there, as income went up, the amount of the voucher received would go down. There is also a possibility that this could include much smaller vouchers for cars purchased not from the big 3.
These vouchers do not have to be used but for those choosing to use them, they would create demand and jobs for the big 3 automakers as well as some impact for other automakers. This is a stimulus plan that is earmarked specifically to help the auto industry and various other industries that are impacted. If people choose not to use them, then the govt saves money and therefore only pays for the money that is actually spent. For any vouchers used, the amount of that voucher goes directly to the big 3 and other automakers who receive them. However, there would be a slightly higher tax in one of 2 ways -1) a higher tax on corporate profits based on the percentage of vouchers received/cars purchased from this package or 2) a direct tax on these vehicles that is slightly higher than the normal taxation on vehicles. This then helps the federal govt to offset the cost of this stimulus package. This isn’t a free ride for anyone. There is another benefit of this voucher program which is outlined below in #4.
2. Vouchers for those consumers struggling in the housing crisis.
Specific guidelines would be outlined for this but it would be similar to the car voucher. For those meeting certain criteria, vouchers would be given to help those in foreclosure or behind in their payments. This would also be a tiered approach based on income. This plan is meant to rescue people from foreclosure, help banks collect on their debts owed to them to provide some relief. Even if it only makes a dent, any payments received for these homes would help ease the money lost by banks as a result of these homes. As a voucher, this money can only be used for this purpose. Once families are no longer in foreclosure or are current in their payments, a re-financing option or home sale could be worked out at the lower interest rates to help save and stimulate the housing market. Additional help for banks can be found if #3 if certain criteria are met.
3. Credit relief for business.
A much smaller bailout plan would be earmarked for 3 categories: banks, the big 3, and other businesses. This would be nowhere near the billions offered now but a TOTAL of 1/3 of that for ALL THREE categories. HOWEVER, each of these would have to meet certain criteria to qualify. The funds given to those who qualify MUST use this money to pay creditors and pay down their debts. This money is not used for bonuses or to use as discretionary money as they see fit. Therefore, a business must be struggling, must need this money to stay in business, and must use it to pay creditors/debt. As a result of this payment, any business who receives money and turns a business profit over the next so many years or quarters will incur a stimulus tax to help pay back money that they received.
4. Responsible credit opportunities for consumers (cont).
The vouchers for cars and houses would create a cash down/larger quity in cars and homes. For those struggling with credit, this will help them with responsible credit amounts that many may be able to afford.
For a smaller income family, 10k towards a used car may result in needing a loan of $2000. The same with the middle income family needing $10k (rather than 20 or 30k). This allows banks to secure loans for people and allow for responsible credit with lower payments that people can afford. The same is true of houses as vouchers will allow people to have larger equity in their homes, save their credit, and free up their current income to refinance or pursue more affordable options. Giving consumers vouchers means cash down resulting in smaller loans but easing up a little on the credit crunch to allow smaller, responsible loans to be issued again. The voucher system comes with a built in benefit of helping people secure responsible loans for affordable amounts.
5. Stimulus checks for Americans.
This would be similar to what we have now. However, the amount would be smaller ($400 per person) and would also come in the form of a voucher/payment. However, this voucher could be spent on any good or service items. Paying off debt, putting into savings, buying CDs, etc would be allowed. However, any voucher not spent on a good or service item would be considered taxable income for the current year. The voucher/stimulus payment is meant to encourage spending in the economy. And while investing or paying off debt is completely permissible, this would be considered taxable income for tax purposes. Otherwise, it’s free money. Again, this is a built in way for the govt to recover some of the money in this plan.
So there’s my plan. Vouchers would be used to directly help businesses, help consumers with housing and cars, and create jobs and demand in these two industries. And because the money would be specific towards these, it cut some of the wasteful spending of other stimulus plans. Money given to banks, auto makers, and other businesses would eliminate bonus checks and blank checks written to struggling industries. This money would be to specifically help those struggling stay afloat and would only be paid back in smaller amounts in the form of taxes for those businesses who turn things around. No other protection will be offered and it allows many businesses to free up some of their cash from all the debt they owe. And finally, this encourages smaller loans and would help stimulate a responsible credit market. Stimulus checks would put money in the hands of the people and be tax free if used to spend in the economy.
Billions of dollars are saved (from current plans) for a plan costing at least half of what is proposed now, money is poured directly into the economy, regulations and controls are in place to account for the dollars given out, responsible spending is encouraged and rewarded, and the govt has set up a plan to recoup some of the money given out to ease the borrowing for this plan.
