A Modest Proposal

After slogging through the various versions of the current economic stimulus proposals I have come to a slightly different one; I call it my Modest Proposal. Since I am not seeking election, and since most likely if I ever ran I would not be elected anyhow, I can feel free not to seek to buy votes as those in our Congress seem to do with their current proposal. Let me begin:

1. Tax Reform: Simply the first step would be a Tax Reform, not spending, and a long term reform. We all know from the now famous Romer and Romer paper that long term tax reform has the largest multiplier on GDP so let's go for it.

i. Eliminate all Corporate Income Tax for all entities except Financial companies whose Tax should be increased to a minimum of 70%.

ii. Eliminate all Capital Gains Taxes except for Financial companies whose tax should be 90%.

iii. Eliminate all Estate Taxes

The result would be a swarming of companies to do business in the US from everywhere, we would become the corporate tax haven of the world.

2. Re-institute the Bank of the United States

This would be a new Bank of the US which would take all of the bad assets that are on the books of the banks and replace them with cash, and then the new bank would work out the problems with the mortgages. Obtain equity from the Banks in return and in addition use the equity to wipe out current shareholders! Control salaries to be pari passu with Federal salaries. After all they would become public utilities.

Just a thought!