The Consumer Tax Cut Explained

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Democrats & Joe Biden have to get Serious about “the REAL Economy” for a Soft Landing to WORK.

There is actually a path, to a soft landing. A soft landing equates to minimal interruptions, in your working careers, as the economy slows, due to interest rate hikes. The real rate of unemployment, as understood by economists, actually has within it, the solution to support growth, long-term job creation, and that soft landing we just spoke of. Because Biden lies, about our Job Rates, saying his 3.7% rate for November is comprehensive of our Job Situation, that does not make the real economy’s rate of 6.7% unemployment, with a black rate 5% higher, over the real rate, at 11.7%, magically disappear.

With diversity as our strength, the economy should work for everyone. The TRUTH matters. The Democratic Party has a policy, agreed to by former President Barack Obama, and the Black Caucus, chaired by Rep. Joyce Beatty (Ohio). This is an undisputed fact. They support the vile policy of undercounting the Job Rates of working-class Americans, including Black Americans, hiding coming and current layoffs, hurting American working-class families, everywhere. They do this with impunity.

The lie about our Job Rates, started back in 1994, with former President Clinton’s administration. The monthly official Job Rate published by the Biden-Harris administration, gives the appearance, President Biden’s 3.7% unemployment rate, taken from the U-3 category of the chart of Alternative Measurements of Unemployment is the most comprehensive measurement, of our nation’s unemployment situation. It is not.

The U-3 category rate of unemployment was never meant to be viewed, as being comprehensive of our nation’s unemployment situation, because it is narrow in scope, as it measures a small worker group, hence, it will always flash a low Job Rate number. Economists, at the time the changes to the unemployment rates were done in 1994, agreed the most comprehensive of the category of unemployment rates is, the U-6 rate, which was 6.7%, for November.

Yet, somehow U-3, the lower of the two category rates, became our official unemployment rate, with no one in the Clinton administration including, Secretary of Labor, at the time, Robert Reich, or anyone, in the Bureau of Labor Statistics taking credit, for making U-3, the official rate. How about this, what if Biden, re-aligned his administration from Clinton’s, and align it with economists, and declare U-6, at 6.7%, for November, as the most comprehensive job rate? No added authority is needed, by Biden to carry this out.

Before continuing, and just to be clear, some of you may not see, or understand how a few percentage points, can make a gigantic difference. If you undercount our unemployment rates, which ultimately leads to hiding layoffs, with a Job Rate lower (Biden’s 3.7% for November) than the real Job Rate, (6.7%), Biden willfully, counts only about 55% of all laid-off workers. He also, counts about 55% of laid-off black workers, who have a higher rate at 11.7%, leaving 45% uncounted. Thus, Biden’s use of the 3.7%, or the U-3 jobless rate, is misleading. It gives the impression we have a better economy than, what is, factually true   

But because we know, I mean the nation knows, how to create jobs, knowing higher interest rates will drive unemployment, and layoffs, higher, any anxiety over job losses can be assuaged. Remember, we have done this before, that is create jobs, and saw high job creation monthly, during our recovery, from the pandemic. So, the soft landing spoken of above, once the Federal Reserve completes its interest rate hikes to quell inflation, is well within our, and the Biden administration’s reach.

If we take the politics out of the pandemic recovery completely, and just look at how the money was spent, by the federal government, we get an idea of how to duplicate the process of job creation, and not just duplicate it, mind you, but chart a historical course, to make it more efficient, and long-term. We know over 10 million jobs were created, in a consistent manner, over the last two years, and we know the federal government spent trillions, doing it. These are facts. So, how was the money spent, and the jobs created?

The Covid 19 pandemic showed us, we have a relatively simple economy, when it comes to growing jobs, unlike some other nations. The consumer powers about 70% of job creation, in our economy. Simply put, that means, consumers spending money, is responsible for 7 out of every 10 jobs created in our economy.

Here is what we know when it comes to factual data. To show the U.S. is a consumer driven economy, we need only look at the Cares Act, the single largest relief bill in the history of the nation, at the time, of its signing ($2.3 trillion), into law on March 27, 2020. We find 75%-80% of the money legislated, went to enhancing consumer spending, directly, or indirectly through stimulus payments, and tax cuts. Additionally, and notice this, about the $2000.00 stimulus check, it was not recorded as part of the gross income of its recipients, so there were no income taxes paid on it (it was given to us tax free, so we could spend it).

Consumer spending, as a result of the Cares Act (stimulus) tax cuts, was a major contributor in the rate of unemployment dropping from 14.7%, in May 2020 to 6.7%, in November 2020. When the nation was on its knees economically, due to the Covid 19 pandemic, policy makers did not turn to, what Republicans have always sold us, as a fix for our economy, and that’s corporate tax cuts, and tax cuts for the wealthy. They turned to consumer spending, to grow jobs and the economy, which led to tax cuts to consumers. These tax cuts were disguised, and intentionally mislabeled by politicians, to look like something other than tax cuts; they called them stimulus checks and tax credits, misleading many of you. 

There were such programs, as the $484 billion Payroll Protection Program, and the $367 billion outlays, of various loans, and grant programs to businesses, and to major corporations, all to keep consumers employed, and spending, to sustain job creation. However, one of the major tax cut programs disguised, as a tax credit program, stood out, and helps us understand, it’s consumer spending, that is at the heart, of our nation’s growth and job creation.

While there was growth, and job creation, due to prior spending during the pandemic, the tax cut to Families with Children, stood out as being very effective. It caused a gust of growth, and job creation. Using Democrats’ figures, roughly $15 billion monthly in TAX CUTS started going out with 170 days left in 2021, as the tax cut to Families with Children programs got underway in July and ended on December 31st. It resulted in $529 million a day being given to, and spent by consumers, every day, on average. What the federal government did was, front loaded money to Families with Children, based on the number of children, Internal Revenue Service records showed they had, and sent them a check.

1.091 million JOBS were created, in July, 483,000, in August, (in spite of the onset of the Delta variant), and 379,000 JOBS, in September during the peak of the variant, as many experts attested to the peaking, at that time. But Republicans, objected to a direct tax cut going to that group of consumers, “Families with Children,” even though the principle of giving consumers a tax cut, resulted in growing our economy and creating jobs for working-class Americans, everywhere.

However, it wasn’t clear whether Senator Joe Manchin and Republicans were objecting to “Families with Children,” as the recipients of the tax cut, or were they objecting to the principle, of consumer spending, as a means to create jobs, and grow our economy. Even a 5th grader can understand this, if you give a tax cut to the 70% (the consumer), who is powering your economy, you are going to get a burst of growth, and job creation through “NEW” spending, by the 70% (the consumer), who is powering, and growing your economy.

If it were just the “Families with Children,” they objected to, as tax cut recipients, there is a more acceptable group of recipients, for the GOP and Democrats. This group’s consumer spending will ensure those same families with children have jobs, and a means to survive, and grow successfully out of this coming Economic Downturn. Baby Boomers, as a homogeneous group, who are retiring at a rate of 10,000 a day, will statistically be the best target of the consumer tax cut. Here is why.

The age group, beginning at 55 plus years, are responsible for 40% of the spending done in our capitalist economy. Baby Boomers are the largest population within that group of consumers. Baby Boomers, who will receive the $25,000 Consumer Tax Cut at the time of retirement, once they start receiving Social Security retirement payments, will spend the money, creating growth, and jobs. A great benefit of consumer spending, as an effect, of a 10%, $25,000 Consumer Tax Cut, will result in continuing, and I do mean, “continuing deficit reduction,” as consumer spending, is already doing, right now.

Here is a more technical rendering of how the 10%, $25,000 Consumer Tax Cut could work when it comes to Baby Boomers.

The Source of the 10%, $25,000 Tax Cut Amount

Let us take a look at the Davis Job Creation and Economic Growth Plan. This is a plan that utilizes the consumer. It takes advantage of the fact; consumers represent seventy per cent of the United States’ GDP. When you look at the Social Security trust fund, it is in reality American workers’ savings account. In essence, it is money put away for use later. Here is the deal, the American worker’s savings account has been depleted by the rich, and the powerful, who monetarily supported politicians that did their bidding. Now, the United States finds itself in a slow growth economy and the country needs to create more consumer demand. If we create more consumer demand, this should increase our economic activity, thus creating more jobs.

Because we know consumers represent 70% of our gross domestic product (GDP), the question that arises, is how do you push capital on a long-term, organized, and sustained basis down to the consumer? The 10% retirement distribution amount is based on the average annual Social Security benefit check for 2019. According to Social Security that benefit amount was, $17,532.00. The $17,532.00 annual payout works out to a monthly income of $1,461.00. The principal amount of capital needed to generate $17,532.00 annually is $254,100.00, earning interest at 6.9% (why use 6.9% annual interest, will be answered in the ensuing paragraphs under Interest Rate Adjustment). 

The 10% across the board tax cut is calculated, based on a one-time partial distribution payment of $25,410.00 from the principal of $254,100.00. In other words, we are allowing Baby Boomers, as they reach full retirement, to take 10% of their average principal, as a tax cut. The 10% partial distribution is $25,410.00. Please note, because this is a tax cut, Boomers are not required to pay this money back or have their monthly Social Security benefits reduced. The $25,410.00 should not be subject to federal, state, and local taxes, or any form of garnishment. They actually receive, an initial one-time deposit from Social Security of $25,410.00. The 10% partial distribution to retirees, based on the average Social Security annual retirement of $17,532.00, is no different than the tax cuts given to millionaires, billionaires, and corporations. The end result is each plan reduces the amount of money in the U.S. Treasury. However, included among these retirees, are the millionaires and billionaires! In that respect, the Davis Plan, is more equitable, than prior Republican tax cut plans.

Calculating the 10%, $25,000 Consumer (Demand Side) Tax Cut

BOOMERS ARE RETIRING AT A RATE OF 10,000 PER DAY having STARTED IN JANUARY of 2012, at the age of 66. 10,000 Boomers per day RETIRING times $25,410 = $254,100,000.00. 365 days times $254,100,000.00 = $92,746,500,000.00 annually. 10 years times $92,746,500,000.00 = $927.5 billion over 10 years.

Distribution of the 10%, $25,000 Consumer (Demand Side) Tax Cut

The retirement of Baby Boomers is happening based on a bell-shaped graphic. The upward line, which forms the left side of the bell, indicates an increasing number of Baby Boomers were born from 1946 to 1955 and the descending right side of the bell shows a decreasing number of births. It is the overall number of Baby Boomers, 68 to 72 million, that makes this Consumer Tax Cut doable. 10,000 Baby Boomers retiring per day represents an average. That 10,000 per day retirement rate, is affected by the following variables: 1) Some people retire at 62 years, losing 25% of their Social Security income. However, early retirement reduces the 10,000 per day average. 2) Death prior to 66 reduces the average. 3) Disability retirements are another variable affecting the daily rate of 10,000 per day. 4) Tax cuts to the wealthy are not stimulative because rich households just preserve their wealth and income rather than spending it. To offset these variables and ensure the integrity and continuity of the 10,000 per day $25,000 stimulus, following are the adjustments, based on the stimulus payments starting in 2021 and continuing for 10 years, the duration of the tax cut. The distribution of $25,000 stimulus payments can be accomplished using the following method. Baby Boomers born in 1955 would receive the $25,000 stimulus payment along with Boomers born in 1946; Boomers born in 1956 would be tucked into the group of Boomers born in 1947; Boomers born in 1957 would be part of the group born in 1948; Boomers born in 1958 would be part of the group born in 1949; Those born in 1959 would be part of the group born in 1950. Boomers born in 1960 would be part of the group born in 1951. Those born in 1961 would be part of the group born in 1952. Boomers born in 1962 would be part of the group born in 1953; Those born in 1963 would be part of the group born in 1954 and finally those born in 1964 would be the final recipients. The increasing numbers of Baby Boomers on the left side of the bell graphic amount to more than 10,000 per day, while the Baby Boomers born on the right side of the bell graphic represent decreasing births. However, when matched or grouped together, their numbers should average less than 15,000 retirees per day, compensating for the variables mentioned above.

The cost of the 10%, $25,000 Demand Side Stimulus Tax Cut is approximately $1.5 trillion, matching the cost of the 2017 Trump Tax Cut. However, the Demand Side Tax Cut, is data driven and will achieve its objective of throttling the recovery. The 50+ year demographic, of which Baby Boomers are the majority, is responsible for 40% of our consumer demand or consumption. Consumption data show low- and middle-income Americans, are more likely than higher earners to spend benefits from the government, creating economic growth and millions of jobs. At its core, the cause of the Economic Downturn is due to a lack of consumer demand. The Federal Reserve (Fed) has studied the character and nature of this Economic Downturn. The study, according to a recent news article stated, “….A new Federal Reserve study squarely pins the blame (cause of this Economic Downturn), on a collapse in demand, as consumers sheltered in home to avoid infection.” The exact wording, in the Fed’s conclusion in that study, dated August 24, 2020, says, “…Current data show that the recent drop in core PCE (personal consumption expenditures)” …. is mainly attributable to large declines in consumer demand for goods and services stemming from Covid-19.”

Consumer spending, which is responsible for 70% of our economic activity, when it comes to creating jobs, is what makes our free market economy work. The truth is, there is no greater economic engine in the world, than U.S. consumer spending. It is a historical fact, consumer spending, made the United States the #1 and largest economy in the world. Therefore, if you increase consumer spending, you will shorten enormously, or end this Economic Downturn altogether. A new American economy, for our families and the next generation, can be built through restoring the lost consumer demand, due to the virus, with a 10%, $25,000 Consumer Tax Cut.

The tax cut is designed to last for ten years and include all Boomers. However, Congress, if prompted by voters, can extend the tax cut to the next generation of retirees. Thus, this “Direct” Consumer Tax Cut, is an opportunity for one generation, the Baby Boomers (1946-1964), to leave a legacy of reformation to America’s capitalist system, that will benefit and be felt financially, by future generations: Generation X (1965-1980); Millennials (1981-1996); and even Generation Z (1997-2012).

There is no question our economy is out of sync! A near 0% interest rate economy is not normal. Retirees are under stress and need relief, from twelve years of abnormally low interest rates. Real unemployment rates are historically high. The solution: a 10% Consumer (Demand Side) Tax Cut, would correct all three problems. In a growing economy anchored by a 10% Demand Side Tax Cut, the Federal Reserve would have room to incrementally raise interest rates without snuffing out recovering growth. With millions of Americans out of work and millions more suffering, our government must act with courage, strength, and urgency. We urgently need to restore our economy to a sustained long-term trajectory of growth, that does not call for easy money or abnormally low interest rates to be the source of that growth. There will be no additional bureaucracy needed, in activating the tax cut, as we have already seen, due to the $1200 stimulus checks, the 10%, $25,000 Stimulus Tax Cut checks can be efficiently distributed through the Social Security system, giving that agency a lift.

Interest Rate Adjustment / Normalization of Interest Rates

The daily spending of $25,000 stimulus checks should create upward pressure on inflation targets set by the Federal Reserve (Fed), the central bank of the United States. This pressure should force the Fed to raise interest rates. When, we go back to 1994, during the Clinton administration’s economic expansion, gross domestic product (GDP) reached 4.0%. Unemployment was at 5.5% and inflation was at 2.7%. The Fed increased the federal fund rate from 3.25% in February to 5.5% in November, during that year.

In 1995, as the federal fund rate reached a high of 6.0% in February, GDP fell to 2.7%, unemployment increased to 5.6% and the inflation rate dropped to 2.5%.

However, the economy resumed upward growth in 1996, with GDP reaching 3.8%, and GDP, continued rising in 1997 to 4.4%, in 1998 to 4.5%, and topped out in 1999 at 4.8%, with the federal fund rate reaching 5.5% on November 16, 1999.

Consider the prime rate; it is the rate, at which banks lend money or retail money, to its more favored bank customers. As a general rule, the prime rate is pegged about 3% above, whatever the federal funds rate is. So, the 6.9% interest earned on the principal capital amount, of $254,100.00, is conservative. Remember, the federal fund rate, in November of 1999, was at 5.5%, and the economy was able to deliver a 4.8% GDP figure. Three percent on top of 5.5% equals 8.5%. The federal government has a moral obligation to pay the going rate, on funds being held in its trust, by Social Security, making the 6.9% interest rate, doable.

Because, the Baby Boomer tax cut, will be a continuing flow of capital directly to the hands of the consumer, higher interest rates or should I say, the normalization of interest rates, by the Federal Reserve, should not impede the economic expansion or economic growth, based on actual Federal Reserve conduct, as illustrated above.

Paying for the Davis Deficit Neutral Job Creation and Economic Growth Plan

The 2020 presidential race produced Democratic presidential candidates, who presented tax plans, they thought were balanced, given what wealth distribution is today, in the United States. Any number of those tax plans would pay for the Davis Plan. Biden’s plan to tax those making above $400,000 would also be adequate. However, the 10% Consumer Tax Cut should pay for itself through the development of new streams of tax revenues at the local, state, and federal level. Once, the free-market style tax cut is enacted, consumer spending will be unleashed, becoming the wind beneath the wings of high-quality 3rd Party Programs, projects such as the Green New Deal and infrastructure projects. Consumer spending, will carry the United States economy to new heights, creating millions of jobs and economic growth.