Stimulate Demand and Supply will Follow

Everyone wants their piece of the pie, the pie being the $787 billion stimulus plan. But the cries from small business for more of the pie have gone on deaf ears, according to their mouthpieces at the NFIB and SBEC.

Of course direct assistance is preferable, but haven't we finally gotten past the days of trickle-down Reganomics? Remember the Lafer curve? Is a payroll tax holiday really an effective stimulus? I think not, it will surely keep the lights on a bit longer for struggling small businesses. But isn't the free market supposed to weed out the week suppliers?

With consumers representing 2/3's of economic demand in the economy, should not the biggest stimulus go that group. And in the bill it does, the biggest single item ($116 billion) is for a tax cut for individuals. People are not spending as much as they were, and won't until they feel better about the economy and their prospects. The direct stimulus to consumers will temporarily prop-up their spending until the job engine restarts. This is what the small business community needs, even if they can't see it right now. Fix the demand side and supply will follow, Economics 101.

NFIB has Some Pull Afterall, Good for their Constituents

News - the IRS has raised the standard mileage rates, good for small businesses and their driving dependent business uses. This will allow them to deduct more for all auto-related expenses, and thus save some bucks on taxes. Thanks IRS.

Back story - the NFIB (National Federation of Independent Businesses), biggest lobbying arm of the small company world had a hand in it. No surprise, since this issue came up as the second highest concern of small business owners in the NFIB's most recent survey. Cost of health insurance continues to be the biggest concern of the surveyed companies.

Strike one for the little guy.

Farm Bill is a Tax on Most All of Us

One of the most egregious handout problems in the US economy is the Farm Bill. Handouts total $50 billion per year, equaling $50,000 per farmer, and the income cutoff is $2.6 million!! I know these folks work hard, but with the handouts their average income is way above the norm in the US.

In a recent The Becker-Posner Blog, Posner writes about this issue. The best near-term solution is to limit the subsidies to farmers at the income level of $200,000 or less. Posner discusses the current offer as proposed by the President, facilely. It probably won't happen, but the Dems should consider it. As I mentioned last time, it will probably take a bold change of leadership to address this kind of intransigent problem.

In the meantime, the extra money given to undeserving farmers is a tax, and an expensive one, on all other industries and persons. This is too big a group to get together and lobby, but too big an issue to continue to ignore.

Tax Equity

So the rubber meets the road, or the money meets the politicians. Can Schumer tax his private equity firms fairly, those who make obscene money (2% plus 20 standard), gave him over $50,000 in the 2003-4 election cycle. Probably not.

Can Michigan's senators (Carl are you there?) help the environment with higher levels of fuel economy up to 40% higher than now, or the car companies? Sorry, he said even though the senate past it, it's not over yet.

Testing the Dems here, money from the big guns, or stick with your regular folks who count on you to do the right thing for America. Looks like the money wins out again. Time to change the system, ya think??