Economic downturn A loan is better than a handout
I prefer the government to give a soft loan to businesses and individuals to cope with the economic downturn, rather than give a cash handout. 

Here are my reasons:

a) As it is a loan that needs to be repaid, it does not really cost anything to the government, unless the loans are not repaid due to bankruptcy. This is likely to be a modest percentage of the total loans. 

b) It is easier for the government to extend the loan to every business or individual that needs the money. There is no need to set up complicated rules to rule out parties that may need the help

c) The amount of the loan can be capped at the actual loss of income of the individuals or the rental and payroll expense of a company. The loan can be extended during the period of the economic downturn and cease when the economy recovers. 

d) An interest rate should be charged on the loan. It can be set at the rate of inflation. This rate can be increased after the economy has fully recovered.

e) The government can pass a law that the full loan or a certain percentage of it can be recovered from the retirement savings of the individual. In the case of a company, it can rank in parity with the secure  debts of the company. 

We should set out the mechanism for the granting of these loans, so that it can be used with clarity when there is a severe economic downturn.

Tan Kin Lian

Vote - do you like this approach?




 

Add Comment

---