More of what Obama should do - Encourage Saving

If Obama wants to get the economy going again, he should do the following things.

He should cut the federal income tax, eliminate the capital gains tax, and increase sales tax. I realize that increasing sales taxes could reduce spending, which decreases demand, which decreases employment. There is no getting around it, we have to take our medicine sometime, lets get it over with. After these, he should encourage the Federal Reserve to raise interest rates slowly over time to reward savers.

One of the major problems in our current economic and financial crisis is that banks are trying to deleverage themselves. Basically, they have spent (lent) too much money and the bills are coming due, so they cannot loan more money right now until they build up their reserves (emergency fund).

1) By lowering the income tax, we give people more of the money they EARNED!
2) By raising the sales tax rates, we encourage people to save that extra money.
3) As people save this money, they place it into bank accounts. This speeds the deleveraging process for the banks and gets them closer to giving loans to people/businesses again.
4) By eliminating the capital gains tax, we encourage people to invest and save their money. In this way we provide more fiancial capital for businesses. In addition, we don't tax people twice on money they have already been taxed on.
5) By slowly raising Fed interest rates, we increase the rate of return savers get for saving. This creates more money to spend eventually, provides more incentive to save more, and helps banks deleverage even faster.


The federal government could help a lot by cutting its spending as well on programs we don't really need and assessing ones we really do.