Wednesday, October 1, 2008

Ramsey is half-right

Radio host Dave Ramsey is circulating a plan to save the economy that makes some sense, at least to me. Aside from praying for Congress not to panic, he thinks the government should insure these crappy mortgage bonds, which would give them value they sorely lack now. He also wants to let everyone behind on their mortgages to roll the past due back into their principal and get a fixed rate at six percent. 
All of that seems reasonable, but the last part of the plan is stupid. He wants to abolish the capital gains tax. He says this would give rich people more money to invest in the economy. That's the same horseshit Reagan and Bush shoveled for years as wages stagnated and personal debt skyrocketed. Rich people are rich generally because they don't let the rest of us get our hands on their money. It's true that increased bank deposits and T-bill purchases would help with liquidity for a while, but we would be right back in this mess a few years down the road.
I think Ramsey is right about how irresponsible consumers have been in managing their finances and he often gives his listeners good advice; however, he is wrong about capital gains. The rate is too low and should be raised to the top income tax rates. That would improve the federal government's liquidity and lessen the need to sell T-bills to China and Saudi Arabia to keep the government afloat.

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