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Thursday, January 24, 2008

The Stimulus Package Just Seems Like Bad Math

I wasn’t a big fan of the stimulus package because, regardless of the idea of the rebates as tax cut, I can’t imagine that the outlay is going to do much to help people. My own rebate will likely go directly into a savings account to be used to pay my 2008 taxes, which doesn’t work much to stimulate the economy, does it? Perhaps I’ll let someone talk me into buying one of Apple’s new Time Capsules, instead--but if I were to be honest, I would probably be doing that regardless of the tax refund.

I support the business tax cuts, on principle, although, but the rebate outlay is going to be huge and won’t address the underlying problems of our economy. People are more than willing to spend: through the toughest parts of the last few years (and through all of the minor recessions of the last few presidencies), citizens have continued to show a remarkable willingness to spend their money to the point that individual savings are frighteningly low. Is spending really the problem?

Anyway, news of the stimulus deal is further dampening my enthusiasm.

Democratic and Republican congressional leaders reached a tentative deal Thursday on tax rebates of $300 to $1,200 per family and business tax cuts to jolt the slumping economy.

Congressional officials close to the negotiations said House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio reached agreement in principle in a telephone call Thursday morning.

The officials, speaking on condition of anonymity, said the two wanted key members of their parties to sign off on the accord before any announcement.

The accord came as the White House said Thursday an agreement was imminent.

Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining rebates of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.

Here’s what bugs me: if a rebate is in any way meaningful, it goes back to the people who have actually paid. This package won’t send money to the people at the top, but it will send to people at the bottom who didn’t pay in. That’s not a rebate, that’s a brand new outlay and another way of piling more debt onto the current deficit. How, precisely, is that a good idea? Another thing that our economy doesn’t need is even more debt from a Federal government that can’t seem to find ways to keep its budget balanced.

Maybe I’m missing something. Maybe the greater good is being served with significant business tax cuts and the trade off is the only way to have made the deal. Maybe, since I’m not an economist, I don’t understand the complex machinery of our economy that will be motivated by giving an extra $300 to those of us earning little enough to receive the bounteous harvest from Uncle Sugar. It would be fair to assert any of the above, and I’m willing to listen to arguments lecturing me in the ways that I’m wrong; but right now I just feel like we’re seeing another bad deal being made that will fail to address the real issues facing our nation’s fiscal future. That just seems like bad math.

At least Pelosi and Co. can now say that they accomplished something over the last few years. Hollow Achievements “R’ Us.

Read the rest.

Update: Investors certainly think that I’m wrong.

U.S. stocks reclaimed higher ground for a second day after a taxpayer rebate plan was unveiled by the White House and the House leadership, lifting an equities market recently battered by worries of an economic recession.

Read the rest.

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