Wednesday, June 15, 2011

What's Wrong With Traditional Solutions

Actually, the government has taken some significant steps to stimulate the economy. Traditionally, if you want to stimulate the economy, you lower interest rates and/or taxes. Unfortunately, lowering interest rates only applies to new borrowing and there's not a whole lot of that right now. When you're tapped out, you're tapped out. You can't take on any new debt no matter how low the interest rate. So how about those tax cuts? Well, there's been a 2% cut in payroll taxes this year, and for the past two years we've had the 'Making Work Pay Credit' on our federal income tax. If our economy was humming along like it was in the late 90's, these tax cuts would probably have caused some significant stimulation, not that we needed any back then. But our debt levels are way too high now. See

As large as these tax cuts have been (taken as a whole), they are only a drop in the bucket for an individual trying to reduce tens of thousands of dollars of credit card debt. So rather than provide stimulus to our economy, all these tax cuts have done is increase our national debt at a time when that is the last thing we need to do.

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