Forum Post: The Solution to our Problems

The problems we are seeing in our country today have a fairly clear and simple solution that would be in everyone's best interest, excluding perhaps the individuals who would have to implement the changes. The first thing that new students learn in economics is that people exploit opportunities to make themselves better off. Therefore, incentives for improvement drive most of the decisions in the business world. Congress has the power to alter the incentives so that it is in the best interest of business to help the community.

Currently there are numerous tax breaks for almost everything one can imagine. We have all heard the complaints about the tax breaks for oil and gas companies that are making record profits. However, there is a way to allow the same monetary gain from tax cuts to the oil and gas companies and at the same time to improve employment and the general social well-being of the nation. The only thing required is for congress to shift the tax cuts. If instead of giving tax cuts to the oil and gas company for exploration and development, they gave an equal amount of tax cuts for employment and investment in small business, then the bottom line of the oil and gas company would be unaffected and at the same time, the country would benefit.

There are countless other examples of tax cuts that could be restructured to allow businesses to continue earning the same advantage, while at the same time shifting the incentives towards improving the financial health of our nation.

Also, Wall Street loves to speculate on just about anything. We saw evidence of this in the 2008 financial crisis with the trading of high risk home loans. The investment banks were essentially packaging high risk mortgages and selling them in bundles for less than the value of the loans with the intention of shifting the risk to someone else. The mortgage scheme backfired, but similar schemes might not. For example, if instead of creating bundles of home mortgages to invest in, Wall Street could create bundles of small business loans. This would create an incentive to inject cash in small businesses around the country, and the subsequent increase in cash flow would create immediate economic benefits that people around the nation would actually feel.

Altering the tax incentives especially would be in everyone's best interest and have no cost to anyone. The investment bundles are more controversial, but they are a first step or a seed for another idea. We have a fantastic market economy in this country, we just need to learn to shift the incentives so that it is more beneficial to help our nation than to harm it.