Sunday, January 27, 2008

Economic Stimulus Package Election style

The Economic Stimulus Package that Republican and Democratic incumbents want to push through in an election year to help them retain their political posts is completely ignorant and just gets worse and worse. The Economic Stimulus Package is neither Liberal or Conservative. It is solely intended to help our current politicians get re-elected and it is an embarrassment.

I will write several posts about this and limit each post to one central idea.

The details of the Economic Stimulus Package are still in flux due to the Senate...

First lets look at the rebate check idea. It looks like the final package will send "rebate" checks worth about 70 billion dollars to taxpayers who pay income taxes and are below a certain income threshold. Washington's intent seems to be to send these rebate checks to low and middle income taxpayers. These rebate checks will go to low and middle income wage earners with at least $3000 in earned income and those with dependent children will get more then those without dependent children.

The Democrats forced the addition of another 30 billion dollars worth of rebate checks that are actually welfare checks to lower income families who would not have qualified for the previously mentioned rebates since they do not pay Federal income taxes. These checks should NOT be called "rebate" checks; they are welfare checks and should be called welfare checks.

I am completely against the idea of rebate checks as outlined above for several reasons:
1. If you want to inject money into the economy then lower taxes a small amount permanently. When Washington lowers taxes they should do it by SIMPLIFYING the tax code.
2. It is absurd to go to the expense of sending rebate checks at all. If it has to be done it should be done as part of the income tax filing process.
3. I have looked at the research of several "think tanks" and respected economists concerning the actual impact on our economy the last time rebate checks were mailed out during the tenure of President Bush. If you average the studies it appears that between 21% and 22% of the money "rebated" to taxpayers was injected back into the economy directly; the rest was saved or used to pay debt. Considering that household debt has dramatically increased since the last "rebate" check debacle, I would surmise that even less of those rebate checks will go directly into the US economy this time. I strongly feel that most Americans will use their rebate check to pay some of the balance of their credit cards; this will NOT stimulate the economy; however it will help the credit card companies and banking companies clean up their balance sheets.
4. I do not agree with the criteria of who they want to send the rebate checks to. They exclude many middle income Americans AND they pay a smaller amount to retired Americans on Social Security.

In short; I detest the idea of rebate checks (30% of which are actually welfare checks) being used to stimulate the economy.

Mike Sylvester

6 comments:

Robert Enders said...

Many liberals believe in Keynesian economics. They believe that since poor people are more likely to spend money, the economy can be stimulated through welfare programs.

Many conservatives believe in trickle-down economics. They think that since corporations create jobs, the economy can be stimulated through subsidies.

By taxing personal incomes to pay for subsidies, then taxing corporate profits to pay for social programs, the government ultimately cancels out any good that it tries to accomplish. It would be better if they just left things alone

Parson said...

I think your are right, most people are going to use the "rebate" checks to pay off their Christmas debt. It really is silly to spend all that money and manpower printing checks and mailing them, when they could be add to the tax refunds. People are getting W2 forms about now are will be filling their taxes for the rebates. Most people hopefully get the money direct deposited into their bank accounts now days.

gadfly said...

Any way you describe it, Democrats believe that our tax system should basically redistribute wealth.

Sad that they do not understand that such policy increases dependency and decreases productivity.

A hand up is always better than a hand out.

Jeff Pruitt said...

Mike,

Even those that don't pay income tax pay the payroll tax. If they're going to push this ridiculous stimulus then all working people should benefit...

LP Mike Sylvester said...

Jeff Pruitt:

Really?

The low income people that I mentioned do pay payroll taxes; however the ones I mentioned in my post get more back in the Earned Income tax credit and they receive more back from the Federal Government then they paid in. The earned income tax credit is welfare and issuing those poeple rebate checks on top of that is even more welfare...

Mike

steve said...

These tax cuts don't make sense in the long term for sure. But they make just as much sense, if not more, than the Bush tax cuts did. Trikle-up relief has more economic potentiality than trickle-down benefits.