How to Jump Start The Economy For The Holidays

Although I am definitely not an expert (or even a talented amateur) economist, it's painfully clear that neither are those who are labeled experts and run (ruin) our economy.

First they say they will buy bad mortgage loans, then they take it back. (Wait! Wait! I have an even better idea...)

OK.  If those idiots are experts, then so am I.  Here are my suggestions on how to put more money in the hands of the consumers, where it will do the most good:

Restore the tax deduction for interest on personal loans - You might not remember, but until the Reagan Administration, any interest you incurred on credit card or other personal loan debt was deductible from your federal income taxes.   Loading up your credit card buying gifts doesn't look so bad if the usurious 24% interest rate the banks charge (the same banks we are bailing out, mind you) is paid for by the taxpayers.  Hey, the same principle applied to mortgage interest helped make buying a home instead of renting the thing to do.

Cap credit card interest at a reasonable maximum - Look, I am all in favor of letting companies make a profit, but banks are charging their credit card customers up to 24% (or more) in interest on their balances.  That's significantly higher than the highest rate those same banks will give you for keeping your money with them.  You'd be lucky if you found a typical savings account that earns more than 3%.   That's quite a gap.  So, to help consumers feel good about racking up debt buying gifts this holiday season, pass a bill to cap consumer credit interest at 15%.  That's still a healthy margin for the banks, but more manageable for the rest of us.

Temporarily reduce sales tax - You want people to buy more?  Make it cost less!  Now, I know that many state and local coffers are nearly empty from the economic meltdown, and lowering a tax that fills those coffers may seem wildly insane, but think it over.  You have two choices: (1) keep the rates the same (or raise them) and nobody spends a thing and no tax revenue is generated, or (2) lower the rates and get people to buy lots and generate more tax revenue from the greater volume of sales.  Hey, as an American consumer I want to buy things. So help me out here!

Give extra time to pay - I don't mean 'Buy now and pay nothing until 2010!'  That's crazy talk, and somewhat misleading (read the fine print). No, what I am talking about is a simple extra month to pay your credit card bill, your mortgage, your utilities, your car payment, etc, etc.  Companies have done this during tough times in the past, and it still works a treat to give more people more money to spend during the Holidays.

Discount, Discount, Discount - This one may seem obvious, but it always surprises me how weak the discounts are and how late in the game they are offered.  If you run a company and you want your sales to be good these Holidays, then be aggressive with your price cutting.  Make it real. Discount till it hurts.  Discount your assets off!  And start it early, like tomorrow even. 

And finally here's some advice for us, the consumers:

Think Big -  We already know that companies are quaking in their corporate boots and praying for decent sales this season.  They will probably be giving discounts on many items, from things that are cheap anyway to things ordinarily very expensive.  So, if you can, think big!  Don't be afraid to buy the 'big' gifts you always wanted to give your loved ones and pocket the big savings that will go with them.  And why stop at gifts?  Take advantage of the desperation and buy those big ticket items you've wanted to buy for yourself.  Just don't get too carried away! You will (eventually) have to pay for it, and even 30% off a Jaguar may still be too much for your budget.