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Economic Stimulus

2012-01-05

Economic stimulus
In times of recession with less than full employment, there is weak demand for goods and services. At the present time, even those who are employed are weighed down by underwater mortgages. State governments are pinched by weak revenue.
There are several things that the federal government should do to correct this situation.
First, a solution to the “underwater mortgage” problem, in fact all the mortgage problems. A voluntary program for all people with mortgages who have problems, whether they are current on their payments or not. Those with mortgages that have variable, unreasonable interest rates can be converted to a reasonable rate on a federally owned mortgage. Those who are underwater or can’t meet their payments on any mortgage can be bought out by the government and converted to rentals. Actually evicting a family should not be done because it leads to an empty house and distorts rental prices; unless, of course, the family can pay but doesn’t.
Second, a solution to employment problems. A national job database, with government jobs (starting at minimum wage) to fix all the infrastructure, maintain the parks (rake leaves, for example), do research, paint murals on post office walls, and so on. The only people eligible to take these jobs are those who have been unemployed for more than a certain time, laid off due to factory closures, teenagers and young adults, and other unemployables.
Third, aid to state governments. The federal government should give states money to prevent layoffs of policemen, firefighters, and teachers.
These programs will not be cheap. They will be paid back tenfold by increased tax revenue due to stimulation of the economy, especially the part that doesn’t save any money. The income of those employed will enter the economy immediately. Demand will increase, and private businesses will be encouraged to spend more, expand, and hire more workers.
GDP is likely to increase by one percentage point per year due to each of these three programs. What’s more, the stimulus is likely to feed on itself by encouraging business to spend the money it has been saving.
The end result of this expenditure will be rapid economic growth, which results in dramatically increased net revenue for the government, making a balanced budget that much easier.

A fourth program, unrelated to our current recession, is important to our survival as a species on this planet.  This program is necessary to address global warming.  The first task will be to establish how serious the projected changes will be.  Such recently suspected changes as a dramatic increase in violent weather events should be evaluated as an existential threat to people.  Changes in the distribution of rainfall are also important.  Drought in some areas and monsoon weather in other areas is to be expected, and the projected severity of these changes must be evaluated.  The second task is to set up mitigating facilities for the expected changes.  Mitigation will range from different crops planted to moving populations away from danger areas.  The third task is to develop ways of ending our dependence on fuels that produce carbon dioxide.  This may be the hardest task of all.

In the long run, it is critical for animal life as well as plant life on this planet that we establish a balance between the production and consumption of oxygen and carbon dioxide.  There is a very long cycle in the atmosphere between these two molecules: it is estimated that it takes about three hundred years for a molecule of carbon dioxide to be consumed, and transformed into carbon and oxygen by photosynthesis.  At the current time, carbon dioxide is present at a very low concentration in the atmosphere: about three tenths of a percent.  The concentration is increasing by a thousandth of a percent every year, and the rate of increase has been increasing recently.

To return to economic policy:
At the same time, changes in the structure of taxation are extremely important for the purpose of fairness. As a billionare himself pointed out, he is paying a smaller percentage of his income for taxes than his secretary. This is not fair, and must be changed.
Fairness is an incredibly important concept. When the distribution of work and rewards is seen as fair, a person will develop great loyalty to the system that controls the distribution. When it is seen as unfair, resentment and disloyalty, sabotage, and revolt may be the result.
Experiments have shown that fairness is important even to chimpanzees and other primates. However, the concept of sharing a task is alien to primates. As a primatologist once said, “you will never see two chimpanzees carrying a log.”
An even more basic concept than fairness is empathy, which has been shown by experiments even in rats. A remarkable experiment recently showed that a rat will work relentlessly to free another rat that is seen to be trapped.
The institution of an economic stimulus depends on the people as a whole showing empathy for one another. They must get together and elect government representatives who will apply the necessary measures. If they do not, the current situation will not improve spontaneously. The longer it takes to start fighting our problems, the worse they will be and the harder to fight.

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