An alternate stimulus package

Quite some post mortem analysis has gone into proposed solutions to fetch us out of the hole that is the current recession. Each of the theories have their benefits and limitations. One of the biggest quandaries facing governments regarding bail outs is the use of hard earned tax payer money to prop up firms that have made serious errors of judgement. The average Joe or Ramnath will not accept the use of his funds for a purpose which does not benefit him in a direct way. All the arguments about the indirect benefits trickling down to him from reviving the economy will not wash. In some ways, this stand is justified.

This being said, there's also no doubt that substantial funds are required to be put to use if we are ever to see the light at the end of this tunnel.

I thought I'd add a proposal to help achieve both if it can be successfully implemented. Its only fair to propose a solution since my previous blog was about a highlighting part of this problem. The implementation of what 'm going to propose requires a lot of intent and a truly purposeful resolve in ending the crisis. The feasibility of this method in my mind though, is quite diminished given the strong nexus between the implementers of my strategy and the source of the funds to be generated for the exercise. But as they say, there are no judgement calls to be made during a brainstorming session and so here's my proposition.

Black money.

We don't have official stats for the unofficial parallel economy that our tax evaders, smugglers, drug traffickers, terrorists etc operate in. I wonder what knock on effect this recession is having on their flourishing industry. Either way, I don't think too many would care if we had two or three great depressions that would break the back of the black market. My absolute "finger in the air"guess is that its probably as large as the organised economy. In any case, what we're really looking for is the recoupment of at least the stimulus package funds that are required.

A crackdown on these ''industries" will be able to deliver the funds we need. Bad money chasing bad assets. You can divide these into two groups from my list above. Tax evasion is the lesser of the evils from my list above and can be treated differently. All those who've evaded tax can be given an amnesty window where they can pay a fine of a percentage of the amount (30% for instance) and be allowed to bring the money into circulation. This isn't my brainwave. I remember the Indian Finance Minister of the time P Chidambaram implementing a Voluntary Disclosure of Tax Scheme like this in the late nineties and if my memory serves me right, it generated a revenue for the government of slightly over INR 1 billion. Now that's already 25% of the funds that the Indian Government is spending in the country's stimulus package. From the people who haven't disclosed after the amnesty period, all the funds can be frozen.

This plan is obviously not to be taken for people who have earned money at the cost of degradation, destruction and murder in society. For the rest of the list, no voluntary disclosures will do. Hunt them down, bring them to justice and put the funds to use for the betterment of society. But who's going to do this? Who will rattle the snakes? Many political leaders are probably part of this industry or abet it in some way, hence my caveat in paragraph three.

So whatever else this may be, in the least its an option for all its worth.