Silly StimulusNow that the popping of the housing bubble is beginning to be felt in the broader economy (thanks to last summer's seizing up of credit markets), politicians are falling over themselves to be the loudest proponent of a fiscal stimulus plan.
I want to be absolutely clear that I am completely in favor of this stimulus plan — I want my $800 back. (And if I were emperor, I would get rid of more than just the 10% tax bracket!) At the same time, I know that this stimulus plan won't achieve its stated purpose. This is one of those cases where bad economics makes people support a good thing for the wrong reasons. The economics of this issue are very confused in the popular media. The great worry of various pundits is that people might not spend their whole tax rebate, and if they don't spend it it won't help the economy. This reasoning is totally backwards. Government spending is pure consumption. If the goal of the stimulus is to see those funds applied to consumption instead of savings, the government should keep the money! Of course, it's not about consumption in the aggregate. (It never should be. Aggregation is the source of many economic confusions.) Government spends money on different things than individuals do, so the rebates will have a genuine economic effect. They will boost the revenues of companies that sell consumer's goods at the (relative) expense of other companies. Whatever part of the rebates is invested instead of consumed — and it will be a lot — will contribute to future production, which is good for the economy. (Yes, sadly, some of that will prop up malinvested businesses and allow them to avoid liquidation a little while longer. However I do not worry that businesses will mistake this one-time stimulus for a genuine reduction in the rate of originary interest; i.e. it won't reinflate a bubble.) I'm completely in favor of diverting funds from wasteful government consumption to beneficial individual consumption and especially to productive investment. I specifically believe that individuals using their rebate to pay down debt is a good thing, too. The economic benefit is that it increases the weight of individuals' spending preferences relative to government's spending preferences. The economic benefit is not that it increases consumption spending. And it's not going to be enough to avert a recession.
© Kyle Markley
— Posted 2008-01-20 22:07:16 UTC —
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Comments: 4
I disagree with your analysis.
First, it's quite likely that if this is enacted as described, you and other middle-class taxpayers will get nothing. That's because many of us are stuck paying AMT. the 10% tax bracket doesn't do much when we're stuck with an alternate tax schedule.
Second, the rebate is *not* money that the government would otherwise be spending. The government is not cancelling various programs, and giving that money back to taxpayers instead. No, rather they are going further into debt. I'd be all for this "stimulus" package *if* it also required the government to cut spending by an equivalent amount.
Of course, as ridiculous as Bush's proposal is (and it *is* ridiculous), you can count on the democrats to come up with an idea that's even dumber. They want to give money back to people who didn't pay taxes to begin with.
As a middle-class taxpayer, I find all this outrageous. (OUTRAGEOUS!). I won't get any money back (thanks AMT!), and I'm going to be stuck footing the bill for everyone else.
I'm confused... who gets some money back? This is the first year in 3 years where I haven't made more than $10k. Would I get money back, and how much, and what's the scale for everyone?
And EXACTLY. God forbid the government should actually be _accountable to a budget_. The rest of us can't get away with "oh don't worry, my children will pay you back" excuses. How much is it going to cost the government to send us all these checks? It's at least 42cents per envelope, nevermind paying the wonderful, ineffecient offcials to calculate our rebates. (Unless WE need to apply for it?)
I'd rather see the government use our money and resources more wisely all of the time, rather than be so reactionary. I'm sick and tired of this "manage-a-crisis" mentallity they seem to have. Everyone should apply the philosophy of "an ounce of prevention is worth a pound of cure".
And BTW, what's so wrong with a recession? We should let our economy balance itself out; like with every aspect of life, there are ups and downs. Anyone who invests knows to look at the long run because eventually everything goes up in value/price, but there can be relatively brief downturns. Trying to "fix" downturns just ensures the next recession will hit even more severely.
There are so many larger, more important issues that need to be dealt with immediately, that I can't understand how such minutia gets such attention from the president.
It looks like you'll be screwed. Per news reports, single folks w/o kids making more than $87000 are slated to get nothing under the latest plan.
Yep! Here are details of the deal. I will get nothing.
In response to #1, of course the government is going into more debt to afford this. But getting money in individuals' hands still affects the pattern of spending in real terms.
#2, you might get something after all:
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