So recently I’ve been playing mind games a lot with myself, trying to figure out politically feasible ways of doing things that are at least somewhat pro-capitalist. Recently, I’ve been thinking of what would I do if I were in the Oval Office, but still had to play politics (in other words, I wouldn’t be able to eliminate Medicaid and Medicare, pull out of Iraq and Afghanistan, etc. immediately).
First, there were the tax rebates of 2008, which cost an estimated $152 billion. Instead of handing government welfare checks out left and right, I would’ve cut corporate taxes in half across the board at roughly the same cost. This would improve business profitability and increase investment, which would provide a much “softer landing” for the economy.
Second, instead of the $29.5 billion Bear Stearns bailout, I would’ve cut capital gains taxes in half and provided a few congressmen with some nice pork to show their districts for the same cost.
Third, instead of the $97.2 billion for Bank of America, I would’ve eliminated all excise taxes (no gasoline taxes!), eliminated the rest of the capital gains tax, and provided congressmen and senators with more pork to bring back home for the same cost. Ultimately, I’m using pork barrel spending as a method to buy out support for these tax cuts.
Fourth, instead of the $97.4 billion bailout of the Big Three, I would’ve reduced corporate taxes by two thirds (which means that, overall, corporate tax revenue would be one sixteenth what it was before the cuts began in 2008) and provided more pork for congressmen.
Fifth, instead of the $112 billion AIG bailout, I would’ve eliminated the rest of corporate taxes altogether, eliminated all customs duties (and trade quotas - how’s that for free trade?) and provided a couple billion more in pork barrel spending to keep my good little congressmen in check.
At this point, businesses would have no taxes to pay, besides their portion of the payroll tax (which is generally viewed as a tax on individuals anyway).
But continuing… instead of the $139 billion for GE and $235 billion for Citigroup, I would’ve begun taking on the payroll tax. I probably would cut the payroll tax across the board by a third. This would still leave $64 billion less spent (or more like $64 billion less collected in taxes), which I would use to buy off Congress once more.
The $300 billion homeowners’ bailout could have gone to cutting the payroll tax by half. I would not touch the individuals’ side of the tax, but instead, I would eliminate the business side of the tax all together. At this point, payroll taxes would only be a third of what they originally were.
Next, instead of the $700 billion TARP, I would completely eliminate payroll taxes and begin my assault on income taxes, by reducing taxes across the board by $300 billion (less than a third) and using the remaining cash to buy off Congress once more.
Then, instead of the $787 billion “stimulus,” I would have completely eliminated income taxes on almost everyone, still leaving some of the taxes intact.
At this point, almost no taxes would exist anymore, besides some select, low income taxes, a death tax, and a gift tax.
I would also [try] to order the Fed to buy the newly created Treasury debt directly from the Treasury and monetize it, while at the same time ceasing all other operations that expand the money supply (e.g. no more lending to banks, no more buying debt from financial institutions, etc.). The result would still be inflationary, but not as inflationary as the current regime of monetizing government debt and using other methods of monetary expansion.
The end result would be radically lower taxes, which would boost investment through the roof, providing a much softer landing for the economy, while at the same time avoiding the moral hazards of bailouts. In the end, economic growth would lessen the effect of inflation over time, as would removal of many of the powers of the Fed (which would go great lengths towards reducing the money multiplier effect).