Robert Reich has a proposal on taxes to stimulate the economy

In his latest blog, posted below with his permission, he suggests the way to stimulate the economy and avoid recession is to take the route of fairness. Now that's a radical proposal. here is the link to his blog

How to Avoid the Coming Recession

I was gratified to read in this morning’s Wall Street Journal that Martin Feldstein, of all people, has joined me in calling for a fiscal stimulus to avoid a coming recession. This won't help with the larger, long-term problem (see my post from yesterday), but it's an important short-term step.

But how to have a fiscal stimulus without adding to the already-way-too-large national debt (now almost 70 percent larger than when Bush came to office)? Feldstein doesn’t say, but here's the answer. All we need do is recognize one simple fact: Lower-income people spend a larger portion of whatever extra income they get than those with higher incomes (in economic jargon, lower-income people have a higher marginal propensity to consume). So every dollar of a tax cut aimed at lower-income Americans packs a bigger stimulative punch than a dollar of tax cut aimed at those with higher incomes. By the same logic, every dollar of a tax increase on higher-income people has a smaller detrimental effect on their purchases than would a dollar tax hike on lower-income people. Get it? The best way to stimulate the economy without adding to the national debt is to cut the taxes of lower-income Americans and pay for that tax cut by raising taxes on those with higher incomes. Presto – a simple formula for being both fiscally responsible and also fiscally stimulative. (That this is also a step toward a more equitable tax burden is an extra bonus.) It’s so obvious and logical I’m surprised Marty didn’t suggest it.

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