Cash Ebb and Flows
Here's a simple idea that just occurred to me. Why don't we get rid of the idea of a free market?
I'm only partly joking there, but the idea that just occurred is actually not a joke. Given that we're seeing a kind of state-financed economy already, with a $700 billion bailout of Wall Street, proposed bailouts of Detroit, etc., and that companies everywhere are experiencing fast-occuring, acute pain in their balance sheets, why don't we first of all agree that there is a role for government in stabilizing the "free" market?
Having done that, now let's agree that if companies can raid the Treasury when times get tough, they need to help build it back up when times are flush.
So, once we get through this immediate crisis, let's, yes, raise corporate taxes by getting rid of the loopholes (and, once those are gone, maybe even lower the rate a few points, to bring it more in line with other countries'). But let's use some of that increase in money -- maybe half of it? -- to set aside in a pool that earns interest and goes untouched until the economic data tanks again. Say, two consecutive quarters of unemployement increases, or GDP contractions, or some simple but intelligent combination of economic indicators as reported by the Commerce Department. At whatever point that is, the money automatically becomes available for low- or no-interest loans to businesses that have filed taxes in the previous year.
Do we concurrently suspend or lower the corporate tax rate in the rough times? Are there certain other loan application requirements a company has to meet in order to borrow from this fund? That's for other people to figure out, people who understand how the current commercial paper market works and how a liquidity crisis brought us to a bigger economic crisis.
But the larger point is this: companies pay into a collective fund in profitable times so that they can get easy credit in tight times. Think of it as an old-fashioned, neighborhood thrift or credit union for Wall Street, Main Street and all the other business districts around the country. Put the money in one of Al Gore's lockboxes. And make the program's availability predictable, based on the generally accepted economic indicators, so that there's less chance of lobbying to game the system.
It's so crazy, it just might work.