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Thursday, January 08, 2009

Obama is Backwards on Stimulus

Obama is warning that without his proposed stimulus, the economy will linger in recession for years. Of course, this is what we have heard every week for the past few months. If we don't do the $750B TARP bailout, there will be dire consequences; if we don't bailout the Big 3, dire consequences; if we don't bail out the states, dire consequences. What has all this bailout achieved? Nothing but less confidence in the government and more deficits.

The opposite is likely the case - if Congress passes his proposals, which are nothing more than wealth transfers, we will see the economy linger for years. (Obama's warning is also strange because he just said yesterday that even with his stimulus, we will have trillion dollar deficits for years, which means he has no confidence in his proposals.)

There is a much better solution - tax cuts for investment. How about cutting the capital gains tax to zero on all assets acquired in the next six months?