Cringely’s Stimulus Package

Bob Cringely is a very smart guy, and I generally like his technology columns. His latest blog post on the current economic crisis is… well… there’s no nice way to put it: it’s bone-headed.

You can skim the first part—it’s boilerplate “government ruins everything” deficit hawkery—but the meat of his plan relies on a reasonable estimate of unpaid taxes:

My proposal to end the recession will cost $20 billion, not $775 billion. I would allocate $20 billion in extra funding for federal tax compliance in the coming year. I’d also open-up such compliance enforcement to private firms. That’s the stick.

The carrot comes in the form of a quite specific form of one-time tax amnesty. Taxpayers who have shorted Uncle Sam will be asked to come forward and report their crimes, which will result in no additional tax payments or penalties – none. If you are a tax cheat and don’t come forward, that $20 billion will go toward hunting you down. If you are a tax cheat and do come forward but lie about the extent of your cheating, that $20 billion will be used against you, too, so there is a huge incentive to be honest and a large penalty for not being so. This is not a free lunch: you have to report IT ALL. That should be about $3 trillion for the last decade, remember.

Taxpayers who choose to participate in the amnesty program will be still subject to random audits but in general their accounts will be wiped clean IF they within the next six months take 50 percent of the tax money they admit to having owed but not paid and use it to buy goods and services in the United States. These purchases would have to be documented. No investments or savings would qualify – just buying stuff.

So, why is this a bad idea? Let’s leave out the practical and political problems involved in ramping up tax enforcement on the scale Bob suggests (because that’s probably actually a good idea). And let’s gloss over, for now, the dystopian vision of privatized tax collection. And let’s just skip right past the huge reporting and record-keeping burden that would be required to document that you spent X dollars where you were supposed to.

The big problem is: where is this money supposed to come from? I sincerely doubt that half of this $3 trillion in unpaid taxes is sitting in savings accounts waiting to be spent. The defining feature of this crisis is that there just isn’t money in the private sector to be spent; that’s why government intervention is needed. Relying on consumer spending to pull us out of this recession when consumer confidence is at an all-time low and when most people are struggling with too few assets and too much debt is not a good plan. No, sir.

Cringely’s Stimulus Package