Some Thoughts on How to Stimulate the Economy

By the time you read this message, Congress may or may not have passed economic stimulus legislation. Either way, to stimulate or not to stimulate the economy is not the question. What is at issue is how to do it in way that will achieve the desired end. As I watch and listen to the debates over the stimulus package proposal, I am torn about what should be done. As they say, “The devil is in the details.” For example, I am not in favor of increasing our national debt, specifically when money is spent on something other than the needs of the Americans who pay the tax dollars that are being spent.

I have never had a problem paying my fair share. All I ask is that those in charge of dispensing those tax dollars focus on the core values of those providing them — the American people.

Most debates seem to focus on the negative impact of more national debt. As a contractor, I view debt as a means of creating more assets or improving the assets that create wealth. While debt should be kept within reasonable limits and ratios, it can have a positive impact when invested properly. Most businesses have debt, manage it well and then create a positive return or impact for the business. The United States can easily handle the exposure of reported debt projections.

The number is just larger and scarier than most of us can comprehend.

The real concern should be where the money created by the debt are spent. Both history and recent studies indicate that spending on infrastructure creates jobs. This is not only a desirable outcome in and of itself, but it also helps American businesses prosper. Both employers and employees pay income taxes, which in turn helps pay off any added debt and makes it possible for the government to stay open for basic operations. And, along with the improved tax base, national assets are increased in value through infrastructure investment.

Another debated item is tax relief, tax breaks and tax incentives. History and recent studies indicate that these items can also help stimulate the economy. Speaking as a contractor and employer, my principal concern is lack of work. If my company cannot find work, I cannot hire employees or buy new equipment. If businesses do not have work, they will not be paying taxes and neither will the unemployed. If you want to have a debt problem, try paying bills without money! The government can give us all the tax breaks and incentives they want, but without work we are not going to hire or buy and given enough time, we too will be in line for food stamps and other government handouts. And I say “good luck” to the government in paying for the handouts when there are insufficient tax dollars coming into the government coffers. That looks like a bigger debt problem to me.

While I don’t have all the answers, I do have an informed opinion. In principle, I am not opposed to either deficit spending or tax incentives, provided they are properly structured. A controlled debt package that includes infrastructure investment is money well spent.

Add to that tax incentives that will further enhance economic activity and you have a recipe for American success and satisfaction.

Regards,


     Terry Dillon