There is an even simpler way: suspend all federal taxation for one year. Pay all the government employees with printing, like what they do now anyway. The total income tax for 2009 was only projectcted to be $1.5trillion, less than two stimulous bills, and less than the projected deficit. Think about it, more than half of the government's spending this year is going to be from printing anyway, so why the heck not just print all of it. The average private sector worker's take-home pay will go up 50% when the tax withholding is suspended altogether! 33% adding to 67% is a whopping 50% increase! Millions of new jobs will be created when people's take-home pay go up by 50%!
The states can print their own IOU's, and allow them to be used for state and local tax payment at par value, but not having a legal tender law requiring merchants to accept them at par. If the state decide to print too much of it, then it will just effectively reduce state tax rate, as people will be paying taxes with the most worthless money accetable (Gresham's Law). The state employees will be watching like hawks lest their pay in state IOU's devalue. It will also provide a graceful transition for people to get out too many superflous government jobs before the form of money that they are paid in become worthless.
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