The #1 Reason Why The “Stimulus” Package Won’t Work…and 1 Thing That Would Actually Stimulate The Economy

Communication breakdown creates most problems, and right now, there seems to be a disconnect between Washington, D.C. and the American people.

Government bailouts and “stimulus” packages are confusing not only to the people but to our Congressmen and women as well.

My goal here is to improve our understanding of how this stimulus package will affect us financially.

The Government’s Financial Statements

Everyone (including the government) has a set of financial statements. These documents help monitor and track where the money goes. Most of us don’t think about the government too often…and perhaps we ought to.

If you’ve read my others posts, you’d see that we are in dire straights financially as a country. It may be helpful to review these posts before continuing to give you a greater context.

Congress has before it a massive “stimulus” package somewhere in the neighbourhood of over $700 BILLION dollars.

Let’s look at this from the standpoint of simple math and money knowledge…

   Assets Liabilities

Taxes Social Security

  Medicare

  Medicaid

  Welfare

  Governement Programs

  Federal Employees

  “Stimulus” Packages

So if we get a “stimulus” package, it becomes a long-term liability on our government’s balance sheet.

The only way for the government to get rid of this long-term liability is by adding assets to the asset column that will generate income to pay for the expense of the liability. It can do this by raising taxesfinding new sources of tax revenue (i.e. tariffs), or continuing to borrow from overseas. Oh…and it can also print more money. Wouldn’t it be neat if you could do that?

None of these options is pleasant or will help our nation regain its strength.

One reason why this “stimulus” package won’t work: it won’t create enough long-term jobs. There are economists on both sides of the issue; however, the simple math doesn’t work.

Our national balance sheet can’t handle another long-term liability that we all will have to pay back with interest…or else print more money and cause inflation.

One way to actually stimulate the economy: reduce the corporate tax rate so companies from other countries would consider moving here and hiring U.S. workers, thus allowing other small businesses to spring up to service these companies and their employees.

According to The Tax Foundation:

“…the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD [Organisation for Economic Co-Operative Development] countries to Japan’s combined rate of 39.5 percent.”

 

Tags: governmenttax

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