The US economy -The way forward

The US economy - The way forward-some random thoughts.
The US economy is in a big mess. The GDP growth (less than 2 %) is not picking up as per expectations. Unemployment (9.1%) is increasing beyond expectations. The debt and deficit are going beyond the means. The rating has been lowered from AAA+. The attempts so far made to improve the economy which include two installments of Quantitative Easing of money have not made any tangible impact. On the contrary it has aggravated the problems. To make the matters worse, the other economies particularly Europe for some reason or other have not been doing well. The economic situation has created a politically tense situation. For the status of US, the present damage to its image, is something unimaginable and not digestible. The think tank of the economy is engaged in arriving at a solution acceptable to the political thinking and improving the economic status. Maintaining the social security without the real backing of the economic security is becoming a challenge. The talk of a double dip recession is going around adding fuel to fire. The situation is abnormal, demanding an abnormal solution. One possible way to come out of this rut is to think of an Economic Stabilisation Fund and use the resources mobilised for infrastructure development, expansion of research and technology, improving skills all around to fill up the existing gap between demand and supply of skilled workers, finding alternate resources particularly for oil and electricity where wastage and extravaganza are visible, educating the people to save and then go for consumption with the support of credit if needed backed by repaying capacity etc. The need for reducing the greed of many is an area where value education is also desirable in a big way.
How to mobilise the resources for the 'Economic Stabilisation Fund' in a fund starved economy is an issue to be tackled? This should not be a problem for this advanced and rich nation. The wealth spread over in the economy with individuals, institutions, multinational companies in the form of gold, shares, high value commodities, real estate or in any form needs to be assessed and the possibility of getting a small share either by way of refundable loans or non refundable contribution to revive the economy has to be explored.
Refundable Basis:
An insignificant percentage of profit or writing down huge reserves of multinational companies towards contributing to this fund with or without interest if necessary by providing a tax incentive can build up the fund fast.
Individuals, institutions, multinational corporates having huge cash reserves can transfer part of the funds to this Stabilisation Fund on refundable basis. They can be paid reasonable rate of interest.
Part of Pension, Provident Funds and other funds of similar nature can be diverted towards this fund instead of investing in capital markets. Reasonable rate of interest can be paid.
Contributions from super rich and wealthy people can be accepted towards this fund and to encourage such contributions some tax incentives can be considered.
Non refundable Basis :
Since the fund is meant for ensuring economic stability on an endurable basis , the Government can consider levying some surcharges or cess from those segments of the society who can really afford without any burden. The following type of levies can merit consideration:
Greed Tax: Those who indulge in heavy gambling and speculation can be made to pay a small percentage of their investment towards this fund. In case they earn on such investments, a separate tax on such income i.e. different from income tax can be levied at a higher rate than the normal income tax. The gambling centres like casinos can contribute a considerable sum from their profit towards this fund.
Turn over tax: Multinational Companies, corporates, dealers, traders, brokers etc whose turnover is more than a cut off limit say $1billion can contribute a very small percentage of 0.01 or even less towards this fund till such time economy recovers/stabilises and overall position becomes comfortable.
Deal/ Transaction tax: Every purchase and sale in all exchanges like commodities, stocks, securities, bullion, foreign exchange etc can be taxed at some lower rates. While purchase transaction can have a very low rate compared to a sale transaction as the latter is generally to make some profit and should attract a higher rate. Short sale transactions should attract a different rate altogether.
Wealth tax and Estate Duty: The economic stability is in the interest of all segments of the society, the expectation from very wealthy and super rich segment to come to the rescue of the economy is naturally high and there is every justification to charge a little extra tax on this category.
Extravaganza Tax:
The concept of expenditure tax particularly on large expenditures on marriages, festivals, parties, clubs etc above a cut off limit can be introduced and funds thus collected can be contributed towards this fund.
Luxury tax:
The tendency to go in for very high end cars and own aircrafts is very much prevalent in the society. This type of luxury can be brought under luxury tax till such time the economy recovers and there is full employment in the society. The objective is not to curb the freedom of luxury but to the timing of indulging in such luxuries when a large segment of people are unemployed /underemployed and the economy is struggling to meet the social safety standards.
The measures suggested can be considered in combination or in isolation.
The economic security should precede social security and from this angle, build up of economic security is sine qua non and should be on the top of the agenda of the Government. The country has everything at its command in terms of human talent, skill, expertise and natural resources and the present economic crisis is not something beyond its control. It has an able, competent, excellent, and committed leader in Mr Barack Obama who aspires the welfare of not only the US citizens but the whole universe and it is an opportune moment to show solidarity and back him with all support to take the economy out of the present predicament. The need of the hour is to regain the lost confidence and for that some extra ordinary measures like creation of Economic Stabilisation Fund should be able to take care of the problem.
Dr.T.V.Gopalakrishnan
Fortworth, Texas