TARP, The 2009 Recovery Act

Both Workable Ideas

Kevin A. Sensenig | December 3, 2012

TARP

It was the right move.  President George W. Bush and his economic team made the right move.  President Obama and his economic team made the right move to further TARP.  1) Stabilize and re-orient.  2) According to Treasury in 2012, all the money was paid back, with interest, from the large entities; and further efforts were underway to address the situation with smaller and local banks.  3) The Recovery money was not meant to be entirely return on funds, but to stabilize, fill gaps, and to redirect.  According to the Recovery website at www.recovery.gov, some were tax breaks, some were investment, and some were grants.

The 2009 Recovery Act

I had no opinion at the time the Recovery Act was passed, and did not follow the detail.  I looked into the Recovery Act somewhat in early 2012, and thought that the Obama team had wanted to take control of a finite set of funds, to direct them with oversight or assigned responsibility to sectors of the economy, and locales, that had been persistently ignored over time, or had fallen behind as a result of the 2008 recession.

I checked the federal website www.recovery.gov — data and detail on Recovery funds, markets, and designees, with statistics and clarity presentation.  Again, this fall I checked the website and realized that about $750 billion had been allocated and spent since 2009 — about 3.5 years.  That’s _less_ than $250 billion per year.  Perfectly reasonable.

Tax Rates

If the lower tax rates were _effective_, then 1) the 2008 crash did not happen; and 2) the unemployment rate would be 6% right now.

I suggest, as does President Obama and his team, a structure-and-detail — with function and society, based on sound premise — review of the budget.

I suggest, as does President Obama and his team, a review of the tax code and simplification.  The personal income tax can be either 1) progressive, to address variations in local markets; or 2) a flat tax, with markets adapting — at the same time various other things happen — such as an increase in safety net and education funding, and better investment strategies.

The Stimulus did _not_ persist the recession, except for subset delay for long term stability and durability.

According to Treasury, federal revenue from taxes is lower than it’s been in over 40 years — not higher — as a percent of GDP.  I suggest that the reference be the optimal tax rate for optimal function of government.  Not “higher” or “lower”, or 5 minute summary analyses repeated without foundation, background, charts, and expertise.

Analysis and review, with _design_ methodology, a careful consideration of function, should speak for itself.  The Obama administration is well aware of this.  Because of the Web and video, the Obama administration can speak for itself.  There are serious journalists in the media, consistent with this, the principle, of awareness, analysis, theory, and detail.

It is clear that to simply re-instate the same economic structure that led to the 1978 recession, the 1989 recession, and the 2008 recession, is _not_ acceptable.  That’s what Obama meant by building an economy meant to last.  It takes time, redesign, and refactoring.

The Recovery Act did _not_ cause the deficit.  It expanded it, but by a worthwhile amount.  That is, about 18%.  _Not_ 90%.  18%.

Thus the careful efforts required.

Corporate Tax On Revenue

I suggest that corporate _revenue_ be taxed, as individual _revenue_ is taxed.  Corporate revenue tax to federal spending and function then is part of the built-in structure of business and corporate, just as the other features of business such as infrastructure, staff, marketing, cost of goods, cost of equipment, wages, input resources, cost of manufacturing, cost of shipping, financials, and so forth.

The federal corporate tax rate can be adjusted to address short-term macro-economic function.  There is more detail, and the administration is fully aware of this.  I support President Obama on economic theory, along with Secretary Geithner, and the team at Treasury.  There may be ways to adapt theory to new circumstances, and this is already being done, is my understanding, perfectly consistent with Representative Federalism.

The U.S. Economy

Recession every 6 years for over a hundred years; bubbles that crash the entire economy; fragile international dependencies; speculation as for-profit rather than speculation as analysis and investment in product and people; inflation that evaporates savings and induces potentially risky investment; inflation that takes away the strategy of _saving_ over one’s lifetime, at the local bank; disparities in _access_ to markets based on culture or education (while acknowledging the variety of cultures and markets that should be freely able to express themselves — and not all expression needs financial resources); generalizations and summaries and cliches in the media on serious economic matters.

Because of the NeXTcube (1989) and the Web (1991) and email (UNIX, 1980s), the Department of the Treasury, and other serious economists in the White House, can put forth charts, graphs, data, analysis, detail, maps, tables, drill-down, and cross-reference — information display and design.  Individuals can review these for themselves, and draw their own conclusions, and ask their own questions.