The $100k solution to restore consumer confidence and stimulate our economy

After reading the newspaper or scanning the headlines on Yahoo or Google, have you ever felt that the world needs a serious headspace adjustment. Have you ever wondered what kind of drugs or recreational pharmaceuticals our political and economic leaders are taking? It is almost as if we are in a walking dream or hallucination in which down is up and right is left. When the banks began to collapse due to bad decisions; the government stepped in and gave them billions and the first thing the executives did was give themselves millions in pay raises and “performance” bonuses.

Performance bonuses for the biggest presiding over the biggest economic failure in over 70 years! Is it just me or does this make any sense when you get fired from McDonald’s for being late a couple of times? Now, in the small business world, failure means bankruptcy; in big business, it means the government will save you, don’t worry. $700 billion in stimulus has gone nowhere but lining the pockets of corporate bank executives and giving Fed Chairman Bernard Bernake an uncomfortable night or two trying to figure out how to give away so much money so quickly. . For the rest of us, over 9% unemployment, $2 trillion in debt, and more taxes, how can we control this?

Let’s flip the equation and see how $100 billion, not $700 billion, can save the economy and the rest of us. The government is so concerned with saving big business that they don’t know that the country’s economic structure has been moving away from the traditional economy for the past 15 years. In the 1930s, the answer was to prime the pump (commercial or government programs) and the economic engine would start up. In today’s economic environment, this will not work as effectively. Those funds are absorbed by the very companies that the government hopes to redistribute wealth and do not reach the market.

Today’s economy is driven by the consumer and their personal confidence; most economists know this, but don’t understand the impact. Consumerism is the economic engine in today’s market: technology, choice, transportation, etc. it has freed the buyer from traditional attachments. The economy is evolving from the top down to a new equilibrium driven by a bottom-up orientation. What does this mean? It means that if you want to prime the bomb, don’t go to businesses that have simply shown bad judgment and hope the good stuff will flow down – provide relief directly to the taxpayer. “Cash for Clunkers” is the first recognition that this approach produces instant results.

For $100,000 we can change the economy by the end of the year. That is how:

• The government establishes Consumer Trust Accounts (CCAs) with a balance of $100,000 for all citizens who filed individual tax returns within the past year.
• This money is not disbursed, it is in the hands of the federal government. It can only be used for debts associated with specific existing activities (home loans, car loans, credit cards, medical bills, etc.).
• Funds can be applied to multiple types of debt with a total not to exceed $100,000.
• The funds can be disbursed either by the debtor authorizing the creditor to access the account for a specified amount, or by the government releasing the funds to the creditor after the taxpayer presents identification documentation.
• The CCA balance expires at the end of the year.

Who wins

1. taxpayers – Two forms of debt have destroyed the economy: home loans and credit cards. A CCA would allow most mortgage loans to become manageable. People facing or in foreclosure or having difficulty making payments may be able to get lower current principal. It could also put an end to most credit card debt problems.

2. general economy – one of the reasons why the stimulus has not worked is that it has targeted and rewarded failure. There are literally billions in toxic loans that are buried in the inventories of financial institutions waiting to explode: they are like toxic waste dumps of superfunds. But while they are toxic from a bank’s perspective, most are manageable from an owner’s perspective. With a CCA to reduce the outstanding balance of the loan, the payments become manageable. This would free up billions in restricted capital that would be immediately returned to the economy by absorbing product inventories, boosting demand and stimulating jobs.

3. Trust – What drives Wall Street and Main Street is not rationality. It’s how you feel: if consumer confidence increases; the market is up If an analyst thinks that things are not going so well – the market goes down and when the forecast changes; the market goes up. But the physical reality hasn’t changed much: AT&T is still the same, etc. What changes is the attitude and perception that drives positive choices and performance. When the dominoes of the financial industry began to fall, the first thing they did was freeze credit. Because they froze credit, everything that lived off revolving credit from consumers and retail businesses came crashing down hard and fast.

4. Small and large retail companies – As the “Cash for Clunkers” program has shown, there is tremendous pent-up demand for shopping and with finance charges reduced on a large scale, people will exert their purchasing power in retail immediately. This will have the effect of reducing inventories and stimulating manufacturing.

5. Government and Politicians – the federal government wins because it is perceived to be doing something concrete for the immediate relief of taxpayers without the disadvantage of allocating funds to companies or states – where the consumer does not see a direct result. As the economy recovers, tax revenue increases. The increase in tax revenue also applies to states.

who loses

1. credit card companies – With the elimination of considerable credit card debt, these companies could lose considerable interest income and the value of their assets could plummet in the short term.

2. financial institutions – all companies with asset values ​​associated with mortgages or large personal debts – foreclosures, debt management, finance companies, etc. For banks, it will actually be mixed because loan book values ​​will go down but foreclosures will go down as well.

3. Babies Banking Bonus– executives who have taken taxpayer funds to save their institutions and their jobs, but chose to reward themselves for their failure with “performance” bonuses and salary increases.

4. In the short term, there will be businesses that will experience short-term constraints because their business models have been sustained through interest around debt payments (for example, furniture stores). But the release of purchasing power could offset these losses.

how do you pay

There were approximately 131 million individual taxpayers in 2008, which means this program would cost $13.1 billion assuming each taxpayer used every dollar in their CCA. that’s less than ONE rescue loan to AIG or Bank of America. This program would be financed by 3 sources:

• Reallocation of unspent money from the current $700 billion stimulus program
• Flat 70% tax on all executive bonuses distributed by companies that received federal bailout money.
• Any CCA funds used would be considered income and beneficiaries would be taxed at the normal rate. The tax would be prorated over a 10-year period beginning in 2011.
• Unused CCA funds would return to Treasury when the program ends.

Conclusion

A Consumer Confidence Restoration Act will bring immediate and substantial benefits to the economy, business, and personal. The program has full recovery, without additional economic burden or increase in the deficit. It requires no new funds and stimulates immediate economic growth. It will build immediate public enthusiasm and positive momentum, which is the heart of expansion. Will it cure the effects of bad business practices overnight or get people back to their jobs in the next 12 months? In some cases – yes – and in others, the new economic readjustment that we are all going through means that some of those jobs are gone forever.

We as taxpayers need a fresh start. It’s time for all of us to take more personal responsibility for our financial well-being and do whatever it takes to make sure we don’t get overwhelmed again. Meet with your representative today and tell them about this idea to positively change our lives and the future of our country.