At the moment there is a serious lack of innovative ideas for helping to heal the economy. The only idea on the table at the moment is payroll tax cuts ... which for a variety of reasons are far from an efficient use of resources ... Let's borrow $100 billion and give it to people that already have jobs so that they can buy stuff, much of it imported from China .. oh and the $100 billion is probably borrowed from China too ... and will have to be paid back out of future tax revenues, with interest.
There have to be better ideas.
Here is one ... its called the h.g.o.d. program, were h.g.o.d. stands for Help Get Outa Debt.
The premise behind the program is simple. The US government can borrow in international markets for 10 years at 2% and for 2 years at ... well ... close to zero percent actually .25%.
On the other side we have citizens that are paying 30% on their credit card bills. Of course the money on their credit card is borrowed from banks who in turn can borrow extremely cheaply, often from the Fed for next to nothing.
So you pay 30%, the banks pays next to nothing and the government pays next to nothing. Surely this is not economically efficient. Too much American income is going to pay usurious interest rates. The only beneficiaries are the banks.
So here is the ""h.g.o.d."" plan.
Each citizen with a credit card balance as of today (bill required) would be given the opportunity to borrow up to $5,000 at 1% for up to 2 years, with the amount to be applied to the credit card balance.
The borrower would be required to make regular payments back to the federal government during the period.
Here is an example:
Harry has a $5,000 balance on his credit card. He currently pays 30% annual interest, so roughly $130 month, just in interest.
Under the plan Harry would borrow $5,000 and pay off his credit card debt. He would then make payments to the god program instead. For the two years his interest payments would total about $100 instead of $3,000 under the credit card.
To make sure Harry uses these bonus low interest rates to pay down his debt he would have to pay $65 a month on his debt for the two years (as opposed to $130 a month in interest to the credit card company). At the end of the period Harry would have to pay back the rest of the loan, unless the program were extended, but he would have had a period with which to work off some of his debt at reasonable interest rates.
Result:
At the end of 2 years.
The government has made money! They borrow at .25% and lend at 1%. So on each $5,000 they make $75 over 2 years. On a $100 billion loaned out, they would make $1.5 billion profit ( excluding admin costs of course) .
Harry instead of having paid $3,000 in interest costs and still having a $5,000 balance on his card, would now have a balance of only $3,540, and he would have had an extra $65 a month of spending money ($1,560 in total over 2 years) to help stimulate the economy ... or to pay down his debt faster.
On an economy wide basis look at what has just happened. The government borrows say $100 billion. At the end of 2 years this is all paid back. The interest cost is covered by the borrowers. The economy though gets a stimulus of $30 billion each year for the two years (30% on each $100 billion) ... and that is at no cost ... except maybe to credit card companies.
Note: the amounts used above are hypothetical and are used to provide a tangible example. They could easily be adjusted to 5 years or $10,000 or whatever.