Let’s just do it
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As every other industry clamours for a stimulus (read bailout) package and intensifies its lobbying efforts with the powers that be (read government), the question that arises is whether there is a superior way to allocate scarce resources. There is. How about putting some money back in the individual tax payer’s pocket. Instead of the government collecting the money and choosing which industry to shower it upon, depending on the industry’s power to please, let the tax payer decide whether he wants more cars (an automatic stimulus for the automobile industry), more houses (stimulus for the real estate) or more consumer durables (stimulus for the consumer durables industry). There is a case for lining the pockets of the buyer, rather than the seller to stimulate the economy. This is already being put in place by the United States. Barrack Obama’s $787 billion stimulus package has two components – tax cuts (36 per cent) and spending on social programmes (64 per cent) – which will ensure that Americans will have more money in their pockets as early as April. It is a fact that tax cuts would be a challenging task for a fiscally constrained government. However, if such cuts manage to revive sagging demand, and, in turn, the economy, buoyancy would return to tax revenues. If such a course were to be followed in a country like India, there would also be an efficiency dividend which comes to the fore with every reduction in the footprint of the government. This reduction was one of the reasons for the country’s high growth trajectory post 1991. Let’s just do it! |
(4 votes, average: 5 out of 5)
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February 25th, 2009 at 3:30 pm
I fully agree with the article however with one caution. Until and unless buyer is having additional money in his pocket and he is assured of his job stability, any half hearted measure would not help in reviving economy. Rather it would widen the fiscal deficit in the time of crisis.
February 25th, 2009 at 2:52 pm
Tax cut doesn’t mean that there will be increase in spending. At current overall negative environment the common people are more conservative in spending. For long term perspective it’s always advisable to save industry. The government have to increase there effort on this front. If industry will not survive so there will be more unemployment, then what common people will do with tax cut? Yes I don’t advise to give stimulus package without proper accountability. The govt should allocate funds which generates more employment & have long term impact on the economy.