President Bush announced today that he wants a nation wide tax rebate to boost the economy or to "give it a shot in the arm" as he put it. The rebate would effect individuals who make under $85,000 a year and couple who make under $110,000. Rebate checks would be between $500 - $1600 and would probably be mailed toward the end of June since the IRS is a little busy right now. This is projected to cost $145 billion. A final decision is expected to be made Tuesday.
I have a couple of questions for the administration along with a few suggestions of my own......
1. Where is the $145 billion going to come from? This money is called "tax relief" and President Bush has cut taxes so I guess it wouldn't come from taxes. We could use the money in the Social Security Reserve, oh wait, we started using that money when President Regan was in office and it is all gone now. We could increase middle class taxes this year since they are the hardest hit anyway, oh wait, we can't do that until 2010 when Bush's tax cuts expire. Let's just pretend we have the money when we don't and increase the national debt. Yeah, that will work....
2. Why are we entering a recession or, excuse me, a "period of slow growth"? The powers that be are blaming a housing slump and a credit crisis for the slow down of the economy. Okay, lets look more into each of those. The housing slump is a direct result of the housing boom of a few years ago. Home buying became like the "your job is your credit" car lots and the end results are looking similar. Anyone who was breathing could get a home loan. I am not against people buying homes, but in the past few years, people who would not have qualified were put into homes with ARM loans, no money down, interest only, and a number of other scam loans that blew up in every one's faces. Congress is now passing laws for the mortgage industry that requires them to only loan money to people who can pay it back. Really, no really, they have to pay it back? What? The credit crisis has basically the same story - banks and lenders were extending credit to people who had no business getting credit - people without jobs, college students, people with poor credit history's, and on and on. It is sad, because the people who are hurting the most are the people who were put into the loans by big companies with deep pockets. We were having a good economy when all these people were spending all their credit........
3. Does the government think that the middle class is stupid? The tax rebate calls for this money to be put in the hands of the consumer as soon as possible. In fact the government has said "putting money into the hands of households and business that would spend it in the near future is a priority." The only way that this tax rebate would help the economy is if everyone went out and cashed their checks and spent them right away. "Spending" that would help the economy does not include paying bills, paying off debt, investing, saving, or paying educational expenses. The government is counting on the middle class and poor going to their local furniture store and buying that king size water bed they have been drooling over or going to Best Buy and taking home that big screen plasma TV. I think that members of the middle class would surprise the government, many are very conservative and movements are going on across the country for people to become debt free (we, personally, are Dave Ramsey converts). The majority of people in this group are not stupid, they are living a quiet life, paying their bills, and saving money for their kids and retirement (because we all know the government will not have the money to take care of us in the future). Of course there are those who will spend every penny of their rebate plus some and will boost the economy that day, but will be back to their broke status the next day. They soon will not be out there spending money.......
........which brings me to.....
4. Is this tax rebate going to solve the economic crisis? Maybe temporarily, but it is not the answer for a soft economy. This will allow Bush to finish his term with a higher approval rating (I love that George Bush, he's gonna send me a check in the mail!), but once the money is spent things will go back to the way they were. What we need is a comprehensive plan to get the economy in shape. We could start with government spending and end with more money in consumer's wallets. Somewhere in the middle we should deal with inflation, getting a handle on credit companies, the national debt, and medical costs. Instead we are going to put another band aid on the problem and hope that it stops the bleeding.
Don't get me wrong, I'll take my check, but I doubt that I will use it to help the economy much. We might go out and eat, but I would imagine that money will fit nicely in our savings account.
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Well when we continually elect lawyers to office why do we expect to find a financial solution. Yes, they have financial people helping them with their plan, but as my uncle said, who was a lawyer and a judge, there isn’t a lawyer that he had met who didn’t think that they knew everything. So even though they have economist on their side that doesn’t always mean that they will listen to them. I like what you say about this only hurting the middle and lower class. As a recent convert to the Dave Ramsey way of thinking, I have often wondered what would happen if old Dave went to Washington and took over the financial side of the Hill. I have also always wondered why congress gets paid so much. Hummm when you look at what they get paid and what they have to pay out and then all the donations by special interests groups then it is quite obvious why much doesn’t happen in Congress. Jump start the economy by cutting their salaries but cutting pay in half, and they would still be some of the highest paid governments in the world. Put that money back in the economy, or put it toward the deficit.
America is barely more than 200 years old and we are still to a degree trying to find out who we are and it seems that we have become what we least desired. America was started on those leaving England because of how they were being treated, and as I look around I wonder if we have become what we most despised (of course we did it in must less time, leave it to America to set another record). Of course I still love this great country of ours, but I do think that it is time to say that we are broken (or broke) and start fixing the problem. Just my opinion though. Good post.
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