Monday, March 9, 2009

Crazy Idea #9 - 2 Solutions

Like that ball of rock and ice flying through the sky that will one day inevitably be the end of us all (some people call it Haley's Comet), the Dow and S&P 500 again streaked to 12 year lows today. I'm a solution kind-of-guy and while watching a few minutes of Mad Money today, I came up with two solutions to help bring the world out of the doldrums. One of the solutions is a big stupid idiot of which I am a fan, and the second solution may be incredibly stupid but I think is legitimately clever. Let's start with the first.

As regular readers probably know, I will be getting married in late summer. Weddings make for a great celebration through the combination of family, friends, and invitees out of obligation. One traditional element of the wedding is the giving of the gifts, where people who are invited to the wedding typically provide a gift that "covers" the cost of their attendance at the reception. It's a general rule of thumb and most people who have the means tend to stick somewhere within this guide. The gifts of home accessories and money help the newly-married couple start their lives together on the right foot, with the possibility of eliminating or paying down debt. It is a great tradition when you are getting married, and a slightly less great tradition when you are invited to a wedding.

One of the biggest reported problems in the economy right now is the cessation of consumer spending. Without consumer spending, companies can't grow, and growth is king of all. People are concerned about their jobs and are therefore reluctant to buy just about anything that they wouldn't deem an "essential". For things like weddings, though, people still do their best to pull out the stops. Because of this, I would like to offer everyone in the world an invitation to our wedding. I won't tell you where it is or specifically when it is happening, but I will provide you with an address to which you can send gifts (remember, you're on the hook now because you've been invited). Consumer spending will receive a much-needed shot in the arm, and it will be all for a great, the greatest, cause. I don't know how many Kitchen-Aid mixers or strainers I'll be able to fit into a kitchen, but I won't know until I try.

For my second trick of the evening, I would like to suggest an idea that combines the fun of taxes (sort of) with the excitement of a stimulus package. Tax season is upon us and American's are starting to look forward to their federal tax returns. Tax returns exist because we essentially pay too much in taxes to the government as a type of zero interest loan over the course of the year, and then the government pays us back after we file our taxes. The only online source I could find said that in 2004, the average federal tax return was $2,436 for early tax filers.

As a country, we have committed to borrowing $728 B as part of the formally approved fiscal stimulus package. Most of this money will come from China (just how did the Chinese get this much money anyway??) and borrowed from whoever else will be willing to lend. I have no idea what kind of interest rate the U.S. government pays on loans of this size, and that is one important piece of the information I am missing. What I suggest is that this year, all tax filers are given the strongly-encouraged (possibly forced) option of temporarily (for the year) forgoing their tax return as a real loan to the government, and the government will pay 0.5% less in annualized interest to its citizens than they would owe to foreign governments. Do you know what $2,438*300M is? That's right, $730.8 billion dollars. This would not lead to any growth in federal government beyond what has already been signed into existence, so those who are concerned about very big government are already screwed, so why not take the money out of our own pockets? Many people already think of their tax return as "free money" - to them it has been lost to the government and getting it back at any time is a bonus. I know more than a few people who do not use this money in the most intelligent way. I believe in personal responsibility AND big government (at least to the extent that, again, it's coming despite anyone's objections), and this seems to be one way to satisfy those who support personal responsibility and those who demand stimulus. If we expect other governments to believe that the U.S. will not default on its loans, we should exhibit that same level of trust in our own country. To steal a phrase commonly used by Jim Cramer - "Invest in America".

If we're going down, let's do it on our own terms.


Daniel J. said...

I'm back. (slowly building up to a full comment someday again)

Gail said...

Similar to John Hodges idea on the Daily Show a couple weeks ago where he declared "emergency Christmas."

If half the people get money back and half the people still owe money, shouldn't you multiple it by 150M rather than 300M?

Ken said...

Emergency Christmas! I had forgotten about that, but yes, the idea is mostly the same with main change being the explicit benefit for me.

There's quite a bit that would need to be worked out about the second idea - I don't know what percentage of people get money back or what the current average return is, but even if only 150M people receive returns, this will still cut into somewhere around half of what we are borrowing from outside of our borders.

Even after several hours have passed, I still like the idea, but I do know that there are more than a few kinks. I have this dream that somewhere, someone will pick up on this idea, actually make it workable, and then give me 60% of the credit. Of course this will never happen, but the dream is nice to hold.