(ThyBlackMan.com) Let me give you some information that may come as a surprise. This information, taken from the book, “The Fix This Time,” will help you cut through the political discourse, regarding economic stimulus, taking place on Capitol Hill.
Since 1980, Republican presidents have given millionaires, billionaires and corporations five major tax cuts. There was during, the Ronald Reagan administration, the 1981 Economic Recovery Tax Cut and the Tax Reform Act of 1986; during the George W. Bush administration, there was the Economic Growth and Tax Reconciliation Act of 1981 and the Jobs and Growth Relief Conciliation Act of 2003 and the Trump administration signed, into law the Tax Cuts and Jobs Act of 2017.
We have had 5 DIRECT tax cuts to millionaires, billionaires and corporations SINCE 1980 with no accountability for economic growth. These tax cuts have contributed massively to income inequality, because that is our new reality. At the other end of the spectrum, there have been ZERO DIRECT tax cuts FOR Consumers.
Now, the nation faces a crisis, where financial markets have collapsed, because of the lack of Consumer Demand for products and services, due to the Coronavirus. However, Consumer demand for products and services was in a decline prior to the Coronavirus, as a looming economic slow-down was already taking shape. The virus intensified weakening Consumer demand.
Consumer spending begin weakening, because of low wages and increasing rent, student loan and credit card debt. Credit card delinquencies have increased to 8.36%, an 18-month high. Auto debt, has risen for 35 consecutive quarters; increasing to $16 billion from the previous quarter. Almost 5% of auto loans are 90 days of more overdue; the highest percentage since the 3rd quarter of 2011.
Now the question of how to rebuild Consumer Demand is before us. There appears to be some ambivalence, regarding the path the nation should take. So, let us start with what we know factually, which will guide us to wise solutions, as solutions matter.
1) We know, when it comes to Democrats giving Consumers a Direct Tax cut similar to the Republicans, the number of times this has happened is ZERO. Democrats, when they assume control of the federal government, usually roll back some of the Republican tax cuts and redistribute the money to citizens through third parties.
Democrats don’t take what has gone directly to millionaires, billionaires and corporations in cash and redistribute that cash directly to Consumers. They do it through Social Service “programs,” (which are third parties), so Consumers never get the benefit of having any sizable amount of money handed to them, as tax relief.
So, we have one political party who hands out money directly to millionaires, billionaires and corporations. And we have another party who hands out money “indirectly” to its constituency through Social Service programs.
2) We know, Trump’s $1.5 Trillion “Direct” Tax Cut to millionaires, billionaires and corporations failed to grow and expand the economy. It was a complete failure. Annual GDP DROPPED TO 2.3%. 3% or higher GDP, prior to the Great Recession of 2008 was normal for the U.S. economy. The Federal Reserve had projected economic growth of just 2% or less for 2020, and that was “before the Coronavirus.”
3) We know, Social Security is not solvent. A Summary of the 2019 Annual Report from SS states: “Social Security’s total cost is projected to exceed its total income (including interest) in 2020 for the first time since 1982..” This of course puts in jeopardy the retirement income of seniors and those approaching retirement. https://www.ssa.gov/OACT/TRSUM/index.html
4) We know, the nation is facing a Recession. Americans are facing layoffs, because of the economic ripple affect of canceling events and the suspension of communal activities presage layoffs, because of the virus. We know, African American workers “will be the 1st laid-off,” as the economy turns downward.
5) We know, helping working Americans, including black communities, requires the wisdom of knowing the strength of our economy is Consumer spending. We are a Consumer driven economy. Consumers spending is what powers our economy and is 70% of the nation’s economic pie. The anticipated loss of Consumer spending, due to the virus, combined with an already predicted economic slow-down is the reason financial markets are collapsing.
6) We know, Republicans have actually calculated, how much it will take to finance a Consumer driven economic stimulus plan. Mr. Trump budgeted $1.4 trillion in his 2021 budget for such a stimulus plan. At the time of writing this article, Republican Senators, along with Mr. Mnuchin, the Treasury Secretary have estimated it would take $1.2 trillion to right the economy. And the $1.2 trillion plan would have in it an estimated $200 billion in tax breaks and cash for corporations, millionaires and billionaires.
7) Finally, and this is most important, we know that how these funds are disbursed and over what period of time they are paid out could result in stabilizing the economy or sending it into a deeper fall, resulting in a Recession.
There are two major problems facing the nation; the short-term problem of unemployment and the long-term problem of how to rebuild Consumer Demand. It appears the short-term answer of giving American workers a $1,000.00 check to tide them over is getting traction and maybe enacted. However, how may times the $1,000.00 disbursements should be done, has to be open-ended, as it is yet unknown the severity of the virus spread. The initial estimated cost of doing this is $250 billion.
In regard to businesses and corporations, the Federal Government shouldn’t be choosing what businesses and corporations to bail out because of the virus, as some Republicans are requesting. Rather, the House Ways and Means Committee should be structuring A Demand Side Tax Cut Plan. Through spending, U.S. Consumers will grow businesses, if a Demand Side Tax Cut Plan is rolled out, expeditiously.
Now, here is what you need to know, if the right Economic Stimulus to the economy is adopted, the long-term problem of more layoffs can be avoided. Fixing the economy long-term is doable through giving Consumers a 10%, $25,000 Direct Tax Cut. Consumers are 70% of our economy. If you give 70% of our economic pie a Tax Cut, you will grow the economy and create opportunities for work. Is this logic lost on anyone?
A 10%, $25,000 Consumer Tax Cut is “a pragmatic solution.” Baby Boomers, who will be the target of the Tax Cut include an equitable number of blacks, as beneficiaries. Even Wall Street will embrace a 10%, $25,000 Consumer Tax Cut, which will drop $254,100,000.00 a day into our economy over the next 10 years. They will compete for this capital, just like every other business, creating jobs, economic opportunity and raise our GDP beyond 3%. Remember, the U.S. economy was already under stress and declining, prior to the virus. The need for a Demand Side TAX CUT is even more pressing because of the virus.
In regard to Social Security(SS) and saving it, SS can be relevant to growing our economy and capitalism. Why can’t SS be used as the delivery channel through which the 10%, $25,000 Consumer Tax Cut can flow efficiently?
The cost of giving Consumers a Tax Cut is less then Trump’s $1.5 trillion Tax Cut. 10,000 Baby Boomers per day RETIRING times $25,410 = $254,100,000.00. 365 days times $254,100,000.00 = $92,746,500,000.00 annually. 10 years times $92,746,500,000.00 = $927.5 billion over 10 years. The Baby Boomers Tax Cut will work in stimulating Consumer Demand over the long-term. Therefore, incrementalism, when it comes to giving Consumers a Tax Cut must come to an end!
Staff Writer; James Davis
Mr. Davis is a leading expert and consultant in Financial Analysis and Social Dynamics. He is a graduate of Florida A. and M. University (FAMU), a former stockbroker, and a human rights activist who resides in Sanford, Florida. He was awarded the prestigious Governor Haydon Burns Scholarship to attend FAMU and while at FAMU was awarded the first Martin Luther King Scholarship. He is the author of three books, among them is “The Fix This Time,” Boost Your Retirement Income! Simultaneously Create Jobs and Spur Economic Growth (https://www.amazon.com/dp/B00MI3PD2M).
Mr. Davis can be reached through his blog @ https://thefixthistime.com.
