(ThyBlackMan.com) The turmoil, inequity, and distress we are experiencing in our nation today can be reversed, with the enactment of a 10%, $25,000 Consumer Tax Cut. Our nation can be transformed economically, with a Demand Side Tax Cut. However, that’s easier said than done, as we look at just a few reasons why, in this article.
The United States, the nation we call home, is the largest and number one economy in the world. We live in the wealthiest nation, in modern history. We have enormous resources. If we deploy our wealth and resources wisely, in the age of Covid-19, we can grow our economy. The pandemic has caused tremendous damage to our economy, resulting in millions of Americans permanently losing their jobs, incurring food insecurity and evictions.
Trillions of dollars have been pumped into our financial system this year, to stave off an economic collapse. We have the people and tools, needed to expeditiously end this Economic Downturn. We know the pandemic caused a lost of consumer demand, as will be later shown. If we can restore that lost demand, economic growth and millions of jobs will follow. We possess the knowledge, but having the will to enact pragmatic legislation, is altogether another matter.
So, that brings us to the economic advisers, who have President Joe Biden’s ear. We need to know how they view our economy. Dr. Heather Booshey, according to a recent article published on October 28th. by Mother Jones titled, “ The Pandemic Forced Joe Biden to Think Bigger. Meet the Economists Who Got Him There,” has emerged as one of Biden’s key advisers.
The reason Booshey caught my attention, is she agrees with two positions I’ve held for many years, regarding tax cuts and job creation. Those positions are:
1) Supply Side Tax Cuts, enacted by Republican presidents are questionable, when it comes to delivering promised economic growth and jobs.
2) Consumer Spending is responsible for 70% of the nation’s jobs.
In an article titled, “The Coronavirus Recession and Economic Inequality: A Roadmap to Recovery and Long-Term Structural Change,” Booshey, regarding tax cuts, states this:
“Decades of tax cuts, culminating in the sharply regressive Tax Cuts and Jobs Act of 2017, have fueled a long-term decline in federal revenue…”
“Policymakers must reject the false premise that tax cuts and deregulation form the basis of effective macroeconomic stimulus. Research finds that even in the best of times, tax cuts favor the wealthy and are not stimulative because rich households just preserve their wealth and income rather than deploying it in an economy that is 70-percent powered by consumer spending. Similarly, researchers have found payroll tax cuts to be among the least effective stimulus programs during recessions.”
Notice, there is no reference or consideration in her comments given to the possibility of a Consumer Tax Cut. It is just not on her radar. When economist generally discuss tax cuts, their reference, as here, are to the 5 Supply Side Tax Cuts, enacted by Republicans, since 1980.
Booshey, even acknowledges, in her comments, consumer spending, powers our economy, meaning its consumer spending that is responsible for creating 70% of the jobs in our economy and is what makes our free market economy work. The truth is, there is no greater economic engine in the world, than U.S. consumer spending. It is consumer spending that made the United States the #1 and largest economy in the world.
Additionally, her comments regarding tax cuts to the wealthy, begs an obvious question. If the wealthy, “preserve their wealth and income rather than deploying it (into the) economy,” what would low and middle income Americans do with that capital, if given a direct tax cut?
Well, there is a factual answer to that question. Consumption data show low- and middle-income Americans are more likely than wealthy earners to spend benefits, from the government immediately and stimulate economic growth and create millions of jobs.
So, Dr. Booshey and (by inference) other economic advisers are telling Mr. Biden and the Democratic Party the following:
1) They reject Supply Side Tax Cuts, as a means to stimulate economic growth and create jobs, for the reasons stated above, and 2) They acknowledge consumer spending is responsible for the creation of approximately 70% of the jobs in our economy. But they do not offer a Demand Side Tax Cut Plan, as a feasible and pragmatic solution.
Nevertheless, a Consumer or Demand Side Tax Cut Plan, is doable. The Federal Reserve (Fed) has studied the character and nature of this Economic Downturn. The study, according to a recent Bloomberg News article states, “….A new Federal Reserve study squarely pins the blame (cause of this Economic Downturn), on a collapse in demand, as consumers sheltered in home to avoid infection.” The exact wording, in the Fed’s conclusion in that study, dated August 24, 2020, says, “…Current data show that the recent drop in core PCE (personal consumption expenditures)” …. is mainly attributable to large declines in consumer demand for goods and services stemming from COVID-19.”
A Consumer Tax Cut, would complement, Mr. Biden’s and Democrats’ planned use of a combination of 3rd Party Programs, public spending, and TAX CREDITS. Once, the market style, data based Consumer Tax Cut is enacted, consumer spending will be unleashed, creating streams of tax revenue at the federal, state and local levels, which could be used by Biden at the federal level to pay for 3rd Party Programs and other projects, such as the Green New Deal.
Baby Boomers, as a homogeneous group, who are retiring at a rate of 10,000 a day, will be the target of the tax cut, are responsible for close to 40% of all consumer spending (consumption), nationally. Baby Boomers also, include an equitable number of minorities. A 10%, $25,000 Consumer Tax Cut, will drop $254 to $300 million a day into our economy, for businesses, both large and small to compete for, over the next 10 years, which would be the duration of the tax cut. This will bring back, by the millions, the jobs lost in the pandemic. The cost of the tax cut would be $1.5 trillion or less, which is comparable to the cost of the Trump Tax Cut, which was legislated to last for the same period, 10 years.
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.