If we really want to stimluate the economy, there are better ways than the government spending more money we don’t have. Richard Rahn’s plan (via Cato):
If government handouts, tax rebates and infrastructure spending are unlikely to help, what can be done? First, recognize what caused the problem – misguided government monetary policy and financial regulation, which created the wrong incentives, and mismanagement of government-sponsored enterprises (i.e., Fannie Mae and Freddie Mac). Thus, Step One is for those at the Fed, Treasury, Congress, etc. to clean up the financial mess they created.
The government could also cut the payroll tax for both employees and employers for at least two years to allow the economy to get back to full employment. A payroll tax rate cut would have the advantage of immediately increasing home pay for workers, while giving them added work incentives, and giving employers an additional incentive to retain or hire more workers. Critics of the idea will complain it will raid the Social Security trust fund – but since Congress has already spent the trust fund money on other things, the additional liability would mean little.
A payroll tax cut will increase the deficit (and it is more costly than an across-the-board tax rate cut, but it has the political advantage for President-elect Obama that it would not be a further rate cut for the “rich”), but if it puts more people back to work and helps end the recession more quickly, the cost would be justified.
As to the additional hole in the trust fund, the government could shift title to some of the land it holds (roughly one-third of all the land in the United States) to the trust fund.
Politicians complain that companies have been shifting jobs to other countries. A major reason is that corporate income taxes in the United States are higher than other countries and regulations are more severe. So a good “stimulus” for job creation would be to cut the corporate tax rate to make U.S. companies competitive again.
That’s a plan I could endorse.