Voters angry ... give them $$

Stimulus Deal Spurred by Fears Of Voter Backlash

Excerpt:

The speed with which Washington hashed out the plan was driven mostly by the drumbeat of bad economic news. Behind the scenes, it was greased by other powerful motivations. Congressional Democrats needed to demonstrate they were capable of results after a year of gridlock. Republican lawmakers, up for re-election, wanted to show sensitivity to voters' economic woes. And the White House didn't want "recession" added to its legacy.

Comment: Consider that we are not even officially in a recession, that some economists do not believe we are are headed for a recession, and the speed of the "deal".

Tax rebate cynicism

Re-Election Stimulus

Excerpts:

As for the economics, oh my. The most this temporary tax cut will do is goose consumer spending for a quarter or two this year. Since the IRS is saying it won't be able to cut the checks until midyear, any recession might well be over, if it even begins. The money to pay for these rebates has to come from somewhere, which means from other taxpayers or from bondholders who lend money to the Treasury. Either way, Congress and the White House are taking money from someone to pass out to someone else. The income effects are thus a wash, as the economists put it, while the substitution effects (higher taxes on the best income producers to finance consumption among the lowest) are negative.

...
Americans lucky enough to qualify should enjoy this little windfall while they can, because the politicians are already planning to take it all back next year. After they're re-elected.

Comment: I'll take it if I get it, but my children and grandchildren will pay for it!

Spending plan debate

Critiques of Spending Plan Retrace Old Debate

Excerpts:

Most economists praised the deal as a necessary effort that by increasing the public debt to put cash swiftly into the hands of ordinary consumers, could limit the severity and duration of a recession and very likely spare some jobs.

...

Another big factor is that an increasing share of goods sold in the United States are made overseas. During the 2001 recession, 18 percent of what Americans spent on food and manufactured goods was imported, according to the Commerce Department. By 2006, the share had risen to 21 percent. “A great deal of any stimulus is going to be sent overseas,” said Alan Tonelson, a research fellow at the United States Business and Industry Council, a trade association of small manufacturers that lobbies to limit imports.

...

The most fervent proponents of free markets criticized the plan as a damaging intrusion by government that incurs public debt for dubious subsidies.

“The economy is working these things out,” said David R. Henderson, a libertarian economist at the Hoover Institution at Stanford. “We’ve got the housing crisis and the subprime, and all these things take a while to settle. The government just doesn’t have the discipline to kind of let things work out.”

...
“One of the factors that’s currently souring this economy is the prospect that taxes are going to be rising in the future,” said William W. Beach, a senior fellow at the conservative Heritage Foundation in Washington. “I’m concerned about the bang for the buck.”


Comments: My son and I were having a discussion about the merits of a tax rebate this morning. Both of us on on the libertarian side ... give it time and the economy will right itself. Meanwhile:

1. Will Washington ever make the tax code easier? In my lifetime?
   
2. The Steve Forbes' "fairer and flatter" idea resonates with me!
   

Flashback to 1999: New York Times: Flat-Tax Follies

The best point scored in the debate was by Senator McCain. He noted that what keeps overall rates high is the ability of powerful business groups to get tax breaks in return for campaign donations. ''Every time we pass a tax bill,'' he said, ''we add another special loophole and a special deal for the special interests.''