Part of the never ending monotony of political rhetoric in this country is the guarantee of “no new taxes” during every election. Somehow the government is supposed to spend more money on projects that we all need and want – like roads, Medicare, Social Security, national defense, etc. – while taking in less revenue. The idea of sweeping “tax cuts” was a major linchpin of the Obama campaign in 2008. They will apparently be a major part of the Obama stimulus plan in 2009. In neither case does the idea make any mathematical sense.
Two University of Michigan economists recently completed a survey that reveals one-time government outlays – such as tax rebates – are a weak method of spurring the economy. Professors Matthew Shapiro and Joel Slemrod surveyed 2,500 Americans who received part of the $150 billion Economic Stimulus Act of 2008. Over $100 billion of that plan was sent out to American taxpayers as a rebate check, but it had almost no effect on the aggregate economy.
The stimulus checks went out in mid-summer, after taxes had been filed, and had little effect in boosting GDP, living standards or any other appreciable economic indicator. The main reason was that most people just used the stimulus checks to make payments on outstanding debts, while others put their money into bank accounts waiting for a rainy day. The small amount of money that was actually spent on “consumption” was primarily wasted on food and fuel which were nearing all-time high prices - just in time to siphon off consumption. In essence, much of the money was wasted on imported oil, and the rest went directly to the banks – in the form of account deposits or debt payments. We should expect the same results for this round of stimulus. The last $100 billion resulted in a 0.1 percent rise in GDP; perhaps the proposed tax cuts of this plan could boost it by another paltry amount.
The simple truth is very easy to understand. Our government has no money and is borrowing everything that it is giving to us. The government hopes that stimulus checks will encourage economic growth – and thus pay for itself – but that is highly unlikely. What they are really doing with this “stimulus” is placating the publics desire for government handouts. Even the most fiscally conservative citizens are happy to receive a government issued check, even if they are against the plan. Why not take the check if they are handing them out?
To make matters worse, hundreds of millions or perhaps billions of dollars from the original $100 billion stimulus were stolen or misappropriated during the IRS’s delivery. Thousands of citizens still have yet to receive a dime of their guaranteed “stimulus check,” while others found themselves ineligible for any number of ridiculously mundane reasons. Obama’s proposed tax rebate plan could be upwards of $310 billion – three times larger than last year’s plan – so the fraud and theft could be even greater this time around.
President Obama’s stimulus package – which is valued at over $825 billion – is likely to be passed by large majorities in both the House of Representatives and Senate. This does not mean that the plan is good; it merely means that Washington politicians want to placate us by using the easiest possible method. They want to give us money and hope we stop clamoring for real answers.
The last thing that a nation with no money needs to be doing is increasing its spending. If the nation absolutely must increase spending, it would be well served to use that money on projects which will actually return on their investment. This plan will almost certainly not reap profits in return on the investment. Instead, it will probably be absorbed into bank accounts and debt payments. Furthermore, since the stimulus checks will likely not go out until spring or summer, the remaining “consumption” spending will be drained by rising fuel prices – gas prices are already up $0.20 in just one month and have risen $0.60 since their November low.
Scholars and citizens have proven that this plan will not work. Yet our Washington policy makers are trudging ahead making decisions that are “in our best interest.” We need to put a stop to this scam before it is too late. We need investment in jobs, manufacturing, infrastructure and energy. That last thing we need to do is redirect billions of dollars to banks and oil companies via a taxpayer middleman.
Front Page Photo by: WendyUsuallyWanders – Google Images
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Click Here For Solutions To America's Economic Problems
The world dynamics has changed, it is a global network, so the solution should be based on that new information. It is like fighting terrorists with Nuclear Aircraft Carriers and your generals want to build more of the same to solve this type of threats.
Bottom line is to stop importing about $66 Billion per month of stuff, mostly manufactred products and watch how fast our economy improve. $66 Billion per month is a drop in the bucket in a global trade while the government would be spending $2 Trillion in all sorts of crazy programs that will do minimal benefit to the industrial job market.
If the government really wants to help its middle class, help the people whose house is being seized by the bank. Chances are that these are unemployed from the same private industrial sector.