High unemployment can be fixed today

There is nothing more frustrating to us (and many of you) than to continue to hear pundits say that we will have a sustained high level of unemployment for years to come. There are a number of ways to solve the unemployment problem – one of which is to lower corporate income taxes (we discussed the benefits of a lower corporate income tax extensively in The THOR Plan located at http://thorinvestment.com/thorplan.shtml ). The impact of a lower corporate income tax on unemployment is fast and measurable. One only needs to look at Germany as an example. Germany lowered its corporate income tax rate twice in recent history. Germany first lowered its corporate income tax rate from over 55% to below 40% in 1999-2000. In 2007, it lowered the rate to 30%. By lowering the corporate income tax rate, Germany became more competitive globally and jobs flooded into Germany. The unemployment rate in Germany was 9.05% in 1998 and dropped to 7.61% in 2001 (in the middle of a recession!). In 2006, the German unemployment rate was 9.8% and fell to 7.4% in 2008. At the end of 2009 it stood at 8%. The US unemployment rate stood at 10% at the end of 2009 compared to just 4.4% at the end of 2006.

The US should also consider going the way of Hungary – yes, we said “Hungary.” Hungary is cutting spending (including the salaries of many bureaucrats), slashing the income tax rate for small and medium-sized companies from 19% to 10% and has gone to a flat tax of 16% on personal income. This is a good response to spark economic growth. The US, unfortunately, has and is taking the wrong course of action.

We at THOR believe that there should have been stimulus to help the US economy back at the end of 2008. There is, however, good stimulus and bad stimulus. Good stimulus creates private jobs and encourages investing. Bad stimulus creates more government bureaucracy with higher paying jobs in the public sector than the private sector. The economy in Washington, DC is doing quite well – see http://www.politico.com/news/stories/0710/39851.html – but what about the rest of the country? Government needs to create an environment where individuals and companies are encouraged to make long-term capital investments, which in turn, will create jobs. We are not espousing a political point of view here, but, rather, an economic one. One only needs to listen to JFK’s words back in 1962 espousing his economic policies that helped create an economic boom in the 60’s – http://www.americanrhetoric.com/speeches/jfkeconomicclubaddress.html. In our opinion, JFK’s policies are the same policies that we should use today.

Sincerely,

Your THOR Team