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December 29, 2008

A Libertarian-Friendly Economic Stimulus Plan?

by Quincy

Based on Brad’s recent post about the stimulus plan and the comments to it, I’ve come up with a plan that puts money in the hands where it can do some good, ours, while allowing the politicians in Washington to claim they’ve done something.

Here are my starting assumptions:

1) The plan must be revenue neutral or else it would die in Congress.
2) The plan must align with the Federal Reserve’s goal of increasing liquidity in the economy to gain its support.
3) The plan must get money in the hands of the people, where it belongs.
4) The quickest way to get money into the economy is to stop withholding it from paychecks.

Based on this, the solution seems simple. Implement a tax holiday period funded by newly-printed dollars from the Federal Reserve. Americans see an immediate boost in the amount of money available to them while federal spending is not negatively (or positively) impacted.

Here are some numbers generated in response to Louis Gohmert’s tax holiday plan:

According to American Solutions, a conservative think tank founded by former Speaker of the House Newt Gingrich, Americans pay $101.6 billion per month in personal income tax and $65.6 billion per month in FICA tax.

A three month tax holiday would inject approximately $501.6 billion into the economy far faster and more efficiently than Obama’s job program can or the Bush stimulus checks did. By balancing the uncollected tax with newly printed dollars, the Federal Government can fast-track money into circulation without having to enlist the aid of banks, who are understandably cautious about lending.

Now, because this idea seems too good to be true, I’ll ask you, the readers, to blow some holes in it. Go!

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P.S. While I know my previous post was arguing for deflation, I realize that with the current and impending leadership in Washington deflation will not be allowed to occur. This plan seems like the next best thing.


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7 Comments

  1. Quincy,

    In the end, the three month tax holiday plan described is nothing more than an arbitary distribution of monetary supply inflation.

    Regards, Don

    Comment by Don Lloyd — December 30, 2008 @ 7:30 am
  2. Don –

    Yes, but an arbitrary distribution of monetary supply inflation is going to happen one way or another given the leadership in Washington. The realistic question for libertarians is not how to prevent it entirely, but rather how to allow it to happen while handicapping the growth of government as much as possible.

    Comment by Quincy — December 30, 2008 @ 8:01 am
  3. You’d have to convince a legislature and an executive controlled by the Democrat party that they really don’t know what is best for us.

    Good luck with that.

    Comment by tkc — December 30, 2008 @ 8:27 am
  4. This was (in broad strokes) the scheme used by the Continental Congress to fund the Revolutionary war. It led directly to Shay’s Rebellion.

    Comment by tarran — December 30, 2008 @ 10:19 am
  5. tarran,

    I’m not seeing the parallels here. I’m no expert on Shays’ Rebellion, but from reading the Wikipedia entry on it, I see a few things:

    The debt after the Revolution was expected to be repaid in gold/silver, which made it nearly impossible for the farmers to repay with their inflated scrip. Alternatively, the American debt owed nationally and to foreigners is denominated in dollars, which the Fed’s printing will actually make it easier to repay.

    The Rebellion was a tax revolt, which if you assume is the endgame of this scenario, is likely whether the Fed prints money and distributes it directly to taxpayers or prints money and distributes it as a “bailout”. I think we can both agree that, while neither of us like it, the Fed is going to print money. What we’re discussing is the “least bad” way for them to do so.

    ————————

    When it’s all said and done, the question we have is whether America will take the tough medicine or whether they’ll try to paper their way out of this. I think we know what modern America thinks of tough medicine.

    So if the Fed is going to paper their way out of this, I’d rather they let me keep what I earn while they inflate rather than inflate and give it to their pet projects.

    Comment by Brad Warbiany — December 30, 2008 @ 1:46 pm
  6. brad,

    You’re right, we won’t have a repeat of the Shay’s Rebellion. I brought it up mainly because it was that event that prompted Hamilton, Madison and their fellow plotters to betray the American Revolution by engineering the imposition of the United States Constitution.

    However, it will inevitably lead to some sort of economic collapse – and I fear the crisis will conclude with an even more authoritarian government imposed upon us.

    Comment by tarran — December 30, 2008 @ 2:08 pm
  7. tarran –

    The money is going to get printed, one way or another. The dollar is out of control, in that regard. Aside from waiting for the collapse to happen, I believe libertarians can work to make sure the current government can’t strengthen itself while causing the collapse.

    It can go one of two ways: the dollar-based economy collapses and the current political class takes authoritarian power in response or we have a chance to shape a new government in the ashes of the one we know failed us. Personally, while the latter is risker, it offers a much better possible return.

    Comment by Quincy — December 30, 2008 @ 2:48 pm

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