What's on your "New New Deal" wishlist to jump-start the economy for the other 95% of us?
Here's my list of items I haven't seen elsewhere. Some of these could be added to a post-election stimulus package that House and Senate leaders are considering; some may have to wait for the new Administration in January. Feel free to add to it, comment, discuss. Hopefully, enough pols or their staff people monitor these boards to pick up the ideas with value.
- For tax years 2008 and 2009, increase the deductibility of capital losses to, say, $10,000.
Under current law, only $3,000 in net losses can be deducted in any one year. Any losses beyond that must be carried forward into future years.
Accelerating the recognition of losses would mean people who were forced to sell stocks at a loss (for example, to keep the mortgage paid) would get an immediate tax break, larger refund or lower tax bill. Like the "rebate" last spring, it would put money directly into people's pockets. Unlike the "rebate," it isn't new Federal money; it merely accelerates the money into the current year instead of putting it into future years.
It would probably be best to make this optional, so that people who don't have enough income to offset the loss don't lose the tax benefit altogether but could defer it to future years.
Most of the benefit from this, of course, goes to those who own the most stock. But they're hurting too, especially employees of banks and Wall Street firms and insurance companies who have lost their jobs and owned stock in their employer, a double whammy. And politically it would help sweeten a package that also includes an unemployment extension and other items aimed further down the economic ladder.
- For tax years 2008 and 2009, allow increased penalty-free (not tax-free) hardship withdrawals from IRAs and 401(k)s.
There is provision for this, but it needs tweaking and clarification. There's increasing evidence of people dipping into retirement accounts to cover mortgage and other basic expenses. From working as a tax preparer, I know that these people are shocked when they find out they owe not only taxes but a 10% penalty on this money. The penalty is there to discourage people from drawing down their retirement accounts, a good goal. But in hard times it makes no sense for someone to be living out of their car to protect some government official's paternalistic view of the person's future security.
The IRS issued a ruling allowing increased and easier hardship withdrawals (from 401ks, not IRAs) for Katrina victims. Either the IRS or Congress could do this again for this economic tsunami.
- Allow states to expand S-CHIP both to cover young adults (up to 25?)and to increase the income limits (perhaps up to 300% of poverty level).
Bush vetoed this the last time around, so it may need to wait until January. I've seen estimates that this could immediately provide coverage to perhaps as many as half of the people who currently have none. It also gives immediate tangible proof that it does make a difference which party is in power.
- Order the government agency that calculates "poverty level" (Bureau of Labor Statistics? HHS?) to recalculate it, for the fiscal year beginning 10/1/09.
The current figures (under $11,000 for a single person, absurdly low for families) are based on a fictitious formula from the 1960s, using faith-based assumptions about the ratio of food costs to overall living expenses, increased by an equally fictitious cost-of-living escalator that is less than the figure used for Social Security. The result is a number that may have been realistic in the 1960s, but is now completely inadequate to provide a "floor" of basic sustenance. Direct that the new figure be based on actual costs of basic living -- rent, food, utilities, etc.
This single poverty figure is the basis for eligibility formulas for all sorts of benefits, from food stamps to Medicaid to Head Start to school lunch to heating assistance to Section 8. Recalculating it to a more realistic figure would immediately expand eligibility for these programs, increasing the safety net under working families.
This move would not, I believe, require Congressional approval nor arouse a huge public outcry. (Yeah, I know, in general we're not wild about executive power-grabs. But this is a task Congress has, legitimately, delegated to the executive agencies.) It's a bureaucratic calculation done by back-office bean-counters. Just pass the word along to do it, and then tell the Secretary of HHS to quietly put enough money into the next budget request to accommodate the expanded eligibility. When people notice that, tell them "the bad economic times" have increased the number of people eligible for safety net assistance.
- Reinvigorate (by administrative directive and hiring the right people) the programs in each Federal agency designed to channel Federal contracts to small businesses, and vigorously enforce the definitions of "small" so that the money really is going to the intended recipients.
We know that small businesses generate more jobs per dollar than large ones, particularly publicly owned ones. They can't afford to hire fat-cat lobbyists to secure earmarks. For the past eight years, these programs have been redirected to reward GOP campaign contributors and other well-connected larger businesses. It's time to return them to their original purpose.
Electing the right people is a good and necessary start to a more progressive economic future. Now we need to begin thinking and strategizing for what we want them to do.