So when Congress gets back in September, I want to move quickly on things that will help the economy create jobs right now –- extending the payroll tax credit to put $1,000 in the pocket of the average worker - President Barrack Obama, Aug. 5, 2011
I must admit to being appalled when the Bush tax cuts were extended in full. That was very frustrating for all of us. But what was more disturbing to me was learning that President Obama was doubling down on supply-side theory by including a "temporary" payroll tax cut. I had hoped for change. (Insert the sound of GboGbo's heading slamming against the desk here.)
My critiques were as follows:
- We've tried the supply-side / tax cut experiment for nearly a decade now and it has been a miserable failure at creating jobs. There is no reason to believe that more tax cuts will change anything, in fact, we haven't seen any growth in job production since the FICA cuts were enacted.
- An employer knows precisely what the demand/supply point is for a worker: just look at the take home pay. That is what a worker is willing to accept in return for performing a job. If you cut taxes (payroll or income), then the worker has a bigger take home pay and the balance is disrupted. Employers will either slow-ball the raise packages over time until inflation re-establishes the balance, or they will lay the worker off and rehire at a lower gross salary. Real wages have been virtually flat since the Bush tax cuts were enacted
- Tax cuts don't pay for themselves. They simply exacerbate the debt problem.
- Perhaps the most important problem is that "temporary" tax cuts seldom remain temporary. Here we have the President himself calling for "temporary" tax cuts to be extended. And given the hostage taking nature of the Norquist-driven Republican party there is no reason to believe they will ever expire. The dedicated funding stream for Social Security has now been handed over to John Boehner and Mitch McConnell as a hostage and for virtually no economic gain.
Okay, I could just give up, or I can try to come up with alternative policies. So what's an alternative?
How about re-establishing the Federal Usury Law? For those of you too old to recall the late 70's, you are forgiven for the blank looks on your faces. It's not a word that ordinary folks throw around much.
Usury is the act of loaning money while charging interest. Prohibitions against usury date to biblical times, and laws against usury or controlling it have existed throughout the ages and trace their provenance from the Bible, Torah, and Koran.
The U.S. had a Federal Usury Law that capped the maximum interest that could be charged on loans, but this was repealed at the very end of the Carter administration during a time of out of control inflation. That inflationary period is long over, but we never reinstated the law. Today we are surrounded by payday loan shops, car title loan swindlers and outrageous credit card rates and fees. The American middle class has been parasitized by practices that used to exist only in the shadowy world of the mafia. Why not reestablish the Federal Usury Law and cap interest rates like before?
Why would capping interest rates be better than the FICA tax cut? Well, a Federal Usury Law would:
- Help both workers and the unemployed. A line of credit can be a lifeline to the unemployed, and today's Mafia-like interest rates are cruel beyond reason.
- Put more money in people's pockets than a payroll tax cut. Household credit/debit card statistics indicate that Americans would see far more benefit from a Usury law than a FICA tax cut. Add in the benefits from taming payday loans impact is much greater.
- Help small businesses since they use credit cards too.
- Not decrease Federal revenues.
- Not put the Social Security funding stream at risk.
- Stop shifting wealth from the lower and middle classes to the banksters.
- Take us back to bedrock American principles.
- Allow the Democrats to shift to a populist footing that would be a political win-win. (If they are willing to buck their corporate overlords!).
- Help Obama establish Sharia Law! (Yes, Sharia Law includes usury provisions, so you just know this will be a line of attack from the wacky right.)
If you have alternative ideas, let's hear them. There just has to be a better way.
4:11 PM PT: Just wanted to say a quick thanks for the rescue! Also, I've noticed that the poll has been trending towards higher percentages for "Reestablishing a Federal Usury Law" all day long.