I have a surefire plan to both help the banks and turn the economy around. Give the stock market a big boost. How? Easy, eliminate the capital gains tax, the dividend tax and cut the corporate tax rate.
Why does the stock market matter? Because higher share prices automatically deleverage banks or companies. Citigroup has much bigger loss reserves trading at $20 than at $3. Isn’t deleveraging what we are supposed to be doing?
The same applies to the battered consumer. Doubling everyones 401K is a big improvement to their debt/equity ratio. And do you think much fatter 401Ks will REDUCE consumer spending?
The obvious problem with my proposal is it doesn’t give politicians what they want, reelection and more power. And it is completely opposite to the Democratic Party desire for a much bigger government.
PS: If Obama goes with my plan, he can then eliminate the “stimulus” package HR1. And you can make the fiscal impact revenue neutral by phasing in a simple, offsetting carbon tax.
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