Here are some interesting ideas floated in a recent Washington Post article to encourage consumers to get back to what they are supposed to do best, spend. What do you think about these ideas?
Lower the price of consuming. State governments could suspend sales taxes, with the federal government picking up the tab. The feds, under this plan, would pay states 5 percent of the 2007 consumption amount of their residents.
Homeowners could automatically renegotiate mortgage terms when prices in their area fall more than 20 percent. Lenders must participate. They would have to reduce the face value of the mortgage by the amount houses in the area fall in value, according to an index of prices in the given Zip code.
Government has spent billions of dollars trying to avoid foreclosures but has not managed to encourage home purchases. “There are many, many potential buyers out there, but they are afraid. Therefore it is important that we initiate some programs to bring the demand curve up.”
Encourage growth through consumer spending. By suspending worker Social Security contributions the government would effectively boost employees’ take-home pay and pump billions of dollars each week into the economy. Workers would feel like they had a better handle on their household budgets, helping boost confidence in the economy. Consumers could spend money on products or services but also pay down debt.