I was thinking and wondering how infeasible this could be. What if the government:

• Cut everyone's Federal Income Tax as: 90% for those in the poverty level, 50% for those above poverty level but under $250,001, and 25% for those above $250,000.
• Put a moratorium on all foreclosures (I believe this was done in some fashion already).
• For anyone who still had a home (and under the risk of foreclosure) the government would pay their mortgage for the next 12 to 13 months.
• Their interest rates would be set at the original rate, if it's lower than their current rate, and be fixed (as opposed to ARM).
• Anyone who lost their home (from 2003 forward) would get that removed from there credit report.
• The government would not give tax refunds from 2009 to 2013.

Would the country fall apart? Would this be too much strain on the economy?

Probably not.

Recessions happen because people lose faith in their ability to trust business transactions. When people stop trading the economy slowly grinds to a halt due to the recessionary spiral.

The only way to get things going again is to make the system trustworthy again. This means putting regulations on all that financial hand waving the bankers came up with since the last recession, in my opinion.


PS: changing interest rates on mortgages is screaming for disaster. It's easy to say on the surface "hey that's a good idea!" but the banks have made such a mess of the system that there are likely dozens of different parties relying on the increased interest rate of all the packages they invested in. Suddenly your parents retirement account, your companies investments, your personal mutual funds, etc, are all losing money. Your parents have to sell their house on a dead market to survive, your company lays off people to handle the loss, and you stop buying things because you have less money, all of which spirals even more out of control.

It's easy to blame the people who bought a house they can't afford. It's also easy to blame the people who invested in such shady investments, but really it's the fault of the banks for playing games with numbers in such a way that it hides the risk inherent in investing in the lending business. Regulations would have gone a long way towards preventing this.

Quote: Original post by Mithrandir
Probably not.
Recessions happen because people lose faith in their ability to trust business transactions. When people stop trading the economy slowly grinds to a halt due to the recessionary spiral.

Probably it was in the times of 1930's depression,but present crisis in addition has another,global reason-the crash of world consumption pyramid.

[Edited by - Krokhin on July 14, 2009 11:48:41 AM]

Quote: Original post by Alpha_ProgDes
Would the country fall apart?

What you propose is grossly unfair to pretty much everyone except those it's intended to help. I think there'd be riots.

Quote: Anyone who lost their home (from 2003 forward) would get that removed from there credit report.

As it stands this defeats the point of credit reports - what effect are you trying to achieve?

I don't mean to be negative - it's good to discuss ideas like this.

Double or nothing your money back.

Quote: Original post by Alpha_ProgDes
Cut everyone's Federal Income Tax as: 90% for those in the poverty level, 50% for those above poverty level but under $250,001, and 25% for those above $250,000.

Reducing federal governemtn income by a very significant amount? I'm not familar with US finances, but I would assume a very significant chunk of federal government revenues come from income taxes on those under $250k.

This means the federal government would have to borrow heavily from somewhere to finance their enormous deficit.

Quote: Put a moratorium on all foreclosures (I believe this was done in some fashion already).

That's right, force debtholders to give away their capital without compensation. Wait a minute, where's the federal government going to get the financing for their enormous deficit if all the capital flees to a safe haven?

Quote: For anyone who still had a home (and under the risk of foreclosure) the government would pay their mortgage for the next 12 to 13 months.

Home != house.

Ok, the federal government would increase their deficit by transferring money directly to the remaining debtholders, which is convenient for them so they can borrow it back to finiance the deficit they're growing by transferring the money to their own lenders. Mmmm, bureaucracy double plus.

Quote: Their interest rates would be set at the original rate, if it's lower than their current rate, and be fixed (as opposed to ARM).

Lost me there. Must be an American thing.

Quote: Anyone who lost their home (from 2003 forward) would get that removed from there credit report.

Hmm, obfuscate risk. Worked for the financiers before the latest recession, should work even better now.

Quote: The government would not give tax refunds from 2009 to 2013.

Would all other debt also be forgiven? How about corporate debt? We could just send all bondholders packing. Reduced debt like that would mean fewer jobs lost.

Quote: Would the country fall apart? Would this be too much strain on the economy?

Well, considering you're proposing a complete abandonment of capital and the capitalist system I would think it would be a pretty significant strain on the economy. Say goodbye to all foreign trade and most industry. I would imagine a rapid breakdown of civil society, a reversion to an agarian existence run by whoever controls access to the best weapons and ammunition. At least the surplus population would be reduced.

I don't think your ideas will work.

Cutting taxes like that sounds great if your goal is to bankrupt the nation. Even if the two wars were ended today and all the troops brought home tomorrow, the bill for those wars still has to be paid. At any rate, I think that's a dumb idea, the kind of thing that Grover Norquist, Stephen Moore or a host of other troglodytes would advocate. Where did you come up with those proposals?

This won't fix our current problems, but we can pretty easily prevent b******t of this scale in the future simply by outlawing the current system which gives every bank CEO in the country a money printing press.

Quote: Original post by LessBread
Cutting taxes like that sounds great if your goal is to bankrupt the nation. Even if the two wars were ended today and all the troops brought home tomorrow, the bill for those wars still has to be paid. At any rate, I think that's a dumb idea, the kind of thing that Grover Norquist, Stephen Moore or a host of other troglodytes would advocate. Where did you come up with those proposals?

Partially from the arse, partially from 'someone needs to give me a (financial) break.

• People in the poverty level get there taxes back in full anyway. So I'm saying the government keeps 10% of those taxes. If my FICA was cut in half, I'd feel alot better about spending as opposed to constantly checking my bank account. The rich can get a break too.
  
• People losing houses left and right. So now those people needs more gov't assistance than before.
  
• We can give the businesses over 400 billion dollars (plus the stimulus!) but can't pay mortgages for a year (i would think paying the mortgages would be cheaper)????
  
• If you got preyed upon and swindled, at the very least your credit scores shouldn't be punished for it, IMO.
  
• If you're getting such a major tax cut, then why do you need a tax refund too?

And yes, I agree better regulations to keep these sheninigans from happening in the first place will be good, if not necessary.

Quote: Original post by Bregma

Quote: Original post by Alpha_ProgDes
Cut everyone's Federal Income Tax as: 90% for those in the poverty level, 50% for those above poverty level but under $250,001, and 25% for those above $250,000.

Reducing federal governemtn income by a very significant amount? I'm not familar with US finances, but I would assume a very significant chunk of federal government revenues come from income taxes on those under $250k.

This means the federal government would have to borrow heavily from somewhere to finance their enormous deficit.

Aren't we already borrowing heavily? The gov't before Obama has been spending wildly. We've given corporations and rich 10 years of guaranteed tax cuts. I keep hearing that the rich in the US pay the majority of the taxes here. So if you're debt burden is reduced, you getting more on your paycheck, encourages you to spend, businesses are making a profit again... why is that a bad thing?

Quote:

Quote: Put a moratorium on all foreclosures (I believe this was done in some fashion already).

That's right, force debtholders to give away their capital without compensation. Wait a minute, where's the federal government going to get the financing for their enormous deficit if all the capital flees to a safe haven?

Once you foreclosure on a house and have no one to buy it, how is that any better than having people stay in their homes and having the gov't pay it? That's more income in those people's pocket which means: bills are paid, spending increases, businesses and people are happier... right?

Quote:

Quote: For anyone who still had a home (and under the risk of foreclosure) the government would pay their mortgage for the next 12 to 13 months.

Home != house.

I misspoke. You are right. I meant houses.

Quote: Ok, the federal government would increase their deficit by transferring money directly to the remaining debtholders, which is convenient for them so they can borrow it back to finiance the deficit they're growing by transferring the money to their own lenders. Mmmm, bureaucracy double plus.

Do we not have that now with the current state of things?

Quote:

Quote: Anyone who lost their home (from 2003 forward) would get that removed from there credit report.

Hmm, obfuscate risk. Worked for the financiers before the latest recession, should work even better now.

Given that those people are not controlling Wall Street or manipulating the numbers for financial forecasts. Yes it should work better.

Quote:

Quote: The government would not give tax refunds from 2009 to 2013.

Would all other debt also be forgiven? How about corporate debt? We could just send all bondholders packing. Reduced debt like that would mean fewer jobs lost.

Honestly, I don't see how my question led to your answer.

Quote: I don't think your ideas will work.

Hence, it was called a naive solution [smile]

[Edited by - Alpha_ProgDes on July 14, 2009 2:05:40 PM]