A true stimulus

The recent history of stimulus programs suggests that at least two ideas thought at first to be surefire winners left a lot to be desired once the results came in.

We all know that the nearly $800 billion package of government spending which was supposed to keep unemployment under 8 percent has instead led to near-double digit joblessness – at least that’s according to the “official” rate, which doesn’t count those who have given up the job search. Factor that group in and the true number is roughly 1 in 6 workers who are jobless.

The second idea of direct cash payments, hatched in 2008 under the Bush administration, cost another $150 billion and barely made a dent in the economic decline as most saved the lump-sum payment or used it to catch up with bills. That initial stimulus turned out to be a short-term boon to creditors but did little to forestall the inevitable economic catastrophe.

So, after trying two “top-down” approaches which cost American taxpayers almost $1 trillion – funding, by the way, that the government didn’t have – perhaps a better idea would be one which keeps money in the pockets of hard-working Americans (at least those who have jobs), allowing them to direct their investment where they see fit. Moreover, it’s an idea already employed by millions of producers and entrepreneurs who aren’t among those receiving a regular paycheck but make their living as independent contractors or via commissions.

Earlier this year Rep. Louie Gohmert (R-Texas) advocated a two-month suspension of backup withholding by introducing legislation in the House. The reasoning behind his effort was to jumpstart the economy by keeping more money in the hands of working people and allowing them to choose whether they invested or spent what they earned.

Given our troubled economic times it makes sense to take a fresh look at the usefulness of backup withholding.

The practice came from the necessity of fighting World War II, and was billed as a temporary solution to the problem of keeping the federal coffers filled and maintaining our war effort against two far-flung enemies. Americans sacrificed in numerous ways during the wartime period but little by little those restrictions were phased out once hostilities ended – all except backup withholding.

Soon the working class deceived itself, embracing the method of taking a little extra out of each check to ensure a bigger refund from the IRS the next spring. The politicians shrewdly calculated this was the way to exact a loan for their spending from the American worker – a loan repaid, without interest, with the check grateful Americans saw as manna from Heaven.

On the other hand, making Americans pay taxes quarterly to the federal government places them in a position where they see the impact on their bank account frivolous federal spending makes. Because of this awareness, allowing wage earners to keep and control their money until the quarterly payment would come due is a benefit Uncle Sam is loath to provide, and they fret about having a shortfall in a time of need.

Yet the idea of trying the same old failed, budget-busting programs for any further stimulus seems like a continuation of Washington’s collective insanity, and given the choice of who controls the purse strings it’s far better to leave the individual in charge than to let Congress determine who wins and loses. Their track record in that regard is not very good.

Let’s follow Gohmert’s lead and put an end to backup withholding once and for all.

Michael Swartz is a Liberty Featured Syndicated writer.

Yet another installment of my op-eds for LFS, this cleared back on October 29. Now we indeed have the double-digit unemployment.

Author: Michael

It's me from my laptop computer.