Reply With Quote
It's like getting a gift card from your significant other, then finding out he/she used your credit card to buy it.
joy.
Sometimes, doing nothing is better than doing something....
No Tax Rebate's Going to Fix This Mess
By Dave Lindorff
Dave Lindorff is a Philadelphia-based journalist and columnist. His latest book is "The Cast for Impeachment" (St. Martin's Press, 2006 and now available in paperback). His work is available at www.thiscantbehappening.netWhen you hear a number like $100 billion (the amount Bush is proposing to give back to people in the form of tax rebates, at about $800 per adult family member) or $145 billion (that $100 billion, plus another $45 billion in business tax breaks—mostly accelerated deductions for capital investment) bounced around, it sounds like a lot of dough, and you might think it would be a good shot in the arm for an economy that is falling into a dead faint.
But let’s think about it on a micro level.
What would my wife and I do with an extra $1600?
Well, to be honest, that’s not quite one month’s mortgage payment.
If we were smart, we’d probably use it to pay down some principle on our credit line, which would over time get us out from under on that dreaded monthly bill a lot sooner. But if we did what most people are likely to do--pay off some bills with it, or one month's mortgage, chances are, given how hard we're all working just to keep going, that we'd then slack off somewhere else just to catch a little break--maybe turn down one assignment, or if we're on an hourly job, turn down some overtime and catch a little more shuteye--and in the end, we wouldn't be adding anything to the economy at all.
But then there are the cars. They both need servicing. The Volvo, a 1993, is suffering from a case of electronic lock collapse syndrome: the right rear door can no longer be opened. It’s frozen in the locked position. The lock button on the driver’s door came unconnected from the latch mechanism inside the door too, so that door has to be locked and unlocked from the outside with the key. And I figure it’s only a matter of time before some of the other doors get frozen in locked position, which could get really ugly when I need to drive with more than one passenger. So I could use probably $1000 of that rebate to get that mess fixed. That would leave $600 for two alignments, two tune-ups and some new tires.
If I were to do all that, I suppose that would be a little boost to the economy, but not much. It certainly would be nice for the auto electric shop guy, but it’s not going to do much for Detroit. Trust me—that extra $1600 is not enough to tempt me to go out and buy a new car. Heck, it’s only about a down payment and two monthly payments on some piece of junk from the bottom of the Chevy or Ford line-up, and after that I’m stuck with payments for four more years. No, I’ll be staying with my old Volvo and the 2001 Honda Civic.
I suspect most Americans are in the same boat. If you have to worry about the future of your job—in my case a continued flow of assignments from various magazines that keep me afloat—you’re not going to go out and buy some big-ticket consumer item just because you got an unexpected $1600 check from Uncle George in Washington.
Economic theory, regarding the "velocity of money" and all that, says that if I do get the Volvo door problem fixed, and if I do buy those new tires and get the cars tuned up and aligned, that money I spend will flow through the economy, making everything hum a little better (not the tires though, since they're probably made overseas so the extra dollars just get lost to the US economy). That’s probably true to a point. The auto electric guy is likely to get a little pick-up in business—mine and other people with door and light problems they’ve been living with for a while. But will it be enough to convince him to go out and hire another employee? I doubt it. Will he invest in new equipment? Nah. I doubt he’d do that, and even if he did, it most likely would be imported too, meaning an end to the stimulus chain. More likely, he’d take his extra dough and go get his pick-up repaired. It’s belching a bit of smoke these days, and looks like it could use some engine work. But again, I doubt that he’ll be ordering a new F-150. And any parts he buys for his vehicle are likely to be imported too, thanks to globalization. That’ll be good for Mexico’s or China’s economy, but not for ours.
Besides, the thing is, we all know that those IRS rebates are a one-off thing. It’s not like they’re going to make this a regular yearly surprise. So you’d have to be an idiot to take the money and pump up your life-style.
And then there’s another problem. By adding another $145 billion to the budget deficit, the government is contributing significantly to inflationary pressures, and when those gnomes in Zurich, London, Tokyo and Hong Kong see that, they’ll bid down the value of the dollar even more. Our once mighty currency, now worth only half a pound Sterling in Britain, or just over 100 Yen in Japan, is shrinking faster than the polar icecap. And that means that all the products we depend on—our tools, our dishware, our clothes, much of the food we eat, and of course our oil—will get more expensive.
I don’t know about you, but my wife and I spend basically every penny we earn each year, in order to make ends meet. Now some of that is for stuff like mortgage payments, tuition payments, etc., but I’d guess that, counting oil and energy bills, probably half our income goes to buy things that are imported, and that’s probably roughly true for most American families. After all, almost nothing is actually made in the US anymore, and we even buy a lot of raw materials—iron, oil, etc.—from overseas. So if for sake of argument and easy math, we’re making $100,000, that’s $50,000 being spent on imported stuff. Now here’s where things get a little speculative. But suppose that having the government add another $145 billion in red ink to the federal budget leads to an extra 3 percent decline in the value of the dollar against foreign currencies—a not unreasonable scenario. Why, that would mean that the $50,000 I spend on foreign goods in a year would cost me an extra $1500—just about the same amount as that $1600 Bush is proposing to lay on me.
But…that weakened dollar will continue into next year and beyond, while the $1600 rebate is a one-time thing.
So what do we get out of this rebate thing?
Worse than nothing.
There is, unfortunately, no free lunch.
]
In fact, it’s worse than that. To the extent that the extra decline in the dollar puts pressure on the Federal Reserve to take some action to prop the Greenback up, we will see interest rates rise. Now at the moment, we’re in hock to the tune of about $25,000 on a home equity credit line—a result of living beyond our means that is the typical American family’s response to incomes that have failed to keep pace with inflation. While my mortgage is fixed-rate, my credit line is not. So if the fed raises interest rates by .25 percent to prop up the dollar from the effects of that one-off tax rebate, I’m going to be paying an extra $650 annually in interest on my credit line balance.
In other words, this rebate is putting me into the hole right from the get-go!
Thanks a lot George!
So how about we just forget this whole stinking rebate idea. It ain’t gonna work, folks. It might sound good in an election year, but if you look at it closely, you can see it’s really just smoke and mirrors.
There is a solution, though. How about if they end the war in Iraq and bring all the troops home. The government will save several hundred billion dollars a year that’s being spent overseas blowing things up—and that is helping to depress the dollar and raise our tax bills. Some of that saved money can help reduce the deficit. Other chunks of it could be invested in America’s badly decaying infrastructure—repairing bridges, building new schools, etc., maybe building some major levees to protect our coastal cities from the next Katrina or from the global warming flood that we know is coming. And all that will mean jobs for people who need them.
We might also try to do something about reducing that massive outflow of dollars that’s making our currency do a disappearing act. An easy way to do that would be to slap higher taxes on gasoline and to tax cars based on how bad their gas mileage is. Before long, most Americans would be driving less and buying smaller, fuel-efficient cars, and we could significantly reduce the single biggest item on our import bill: oil.
Don’t get me wrong. I’ll be happy to get that $1600 check George Bush is calling for. I’m certainly not going to return it to the Treasury! But let’s not be pretending that it’s going to jump-start the sick economy.
It might even end up making things worse.
Oped News
It's like getting a gift card from your significant other, then finding out he/she used your credit card to buy it.
joy.
40% of "taxpayers", on the low-end, don't even qualify to pay incomes taxes, so they, who are most in need, living from paycheck to paycheck, and most likely to spend it quickly, won't get a penny.
Last edited by boutons_; 01-20-2008 at 02:36 PM.
If you don't pay taxes...you've already GOT your tax rebate.
And one of the more idiotic statements I hear..."the poor are more likely to spend the money they get (from other people, btw)."
Like the people who have the money to begin with, wont spend or save it...but just hide it under a mattress. And yes, putting the money in savings allows banks to "spend it" and put the money into the economy.
Giving tax money to people who dont pay taxes is welfare. Giving tax breaks or rebates to people who earned that money aint. Let the people who earned the money spend it...they have that right, donchathink?
And whether or not a Tax rebate will "fix this mess" is sorta irrelevant. The mess has been coming for 50 years. Tax rebates are morally right. Mandated increased spending by govt is morally wrong.
Spending is, has been, and always WILL BE the problem.
ing DEAL WITH IT!
............
I am one that also doubts more rebates, lowering taxes more, etc. will help any. I think we are close enough to the optimum taxation for the type of system that we have, that reducing effective tax rates farther might reduce government revenue rather than enhancing it.
I believe the solution is in either changing the way we tax, or reestablishing tariffs. This reduction in tax rates we have enjoyed for a few years has worked. You can only reduce tax rates so far until revenues decrease. After all, revenues are zero at both 100% taxation and at 0% taxation. Where is the optimum point?
10%
Nobody should have any more taken from them. Nobody. , I'm an atheist...but, even ancient religions proclaimed 10% should go to them. Taking more is immoral even to those trying to hold up to higher moral standards. And they are right. If the govt can't operate off taking 10% of peoples money...it, simply, has, to, do, LESS! You don't ask govt "how much do you need?" Cuz they "need" it all.
You say..."this is how much you got, it's 10% and no more...you better not ing waste it."
Now, someone please ask me what I'd get rid of
Last edited by SouthernFried; 01-21-2008 at 01:44 AM.
Okay, what would you get rid of? Happy now?10%
Nobody should have any more taken from them. Nobody. , I'm an atheist...but, even ancient religions proclaimed 10% should go to them. Taking more is immoral even to those trying to hold up to higher moral standards. And they are right. If the govt can't operate off taking 10% of peoples money...it, simply, has, to, do, LESS! You don't ask govt "how much do you need?" Cuz they "need" it all.
You say..."this is how much you got, it's 10% and no more...you better not ing waste it."
Now, someone please ask me what I'd get rid of
I'll take it.
....I'm thinking it's not preemptive war...Okay, what would you get rid of? Happy now?
...which costs a uva lot more than 10% of the total American income.
read the sig
10%???10%
Nobody should have any more taken from them. Nobody. , I'm an atheist...but, even ancient religions proclaimed 10% should go to them. Taking more is immoral even to those trying to hold up to higher moral standards. And they are right. If the govt can't operate off taking 10% of peoples money...it, simply, has, to, do, LESS! You don't ask govt "how much do you need?" Cuz they "need" it all.
You say..."this is how much you got, it's 10% and no more...you better not ing waste it."
Now, someone please ask me what I'd get rid of
Social Security ALONE is more than 10%!
Yeah, the rebate thing isn't going to make a damn bit of difference, however, anyone that is against it, please give me your home address so I can come to your house, beat you up, kick your dog, and then take your $800.
Come on fellas, Johnsmith wants a new LCD TV. Not something huge, just an $800 job so I can hook the Xbox to it upstairs instead of down.
I'm not stupid enough to turn down $800 or $1600 of what was my money in the first place, even though I know it won't make much of a difference in stimulating the economy, and I also know it is just a case of kicking the can down the road toward a more severe reckoning involving hyperinflation of the dollar and the end of American economic hegemony in the 2010's or 2020's.
I 100% agree with you.......especially the part about not being stupid enough to turn down my own money being given back to me.
I'm gonna buy a TV
I'm going to invest in the housing market.
You can almost get a gold coin with that kind of money.
I think I will too.
Im donating it to Social Security.
I'm gonna buy 1600 Lottos
Put your money into the money market. Very liquid, if
needed, and interest is set by the market. It was very
good to me during the Carter years and shortly there
after.
I think I'll pay medical bills with it.
I dont pay taxes so is there anyone willing to help a poor soul out?
WC, here's Bernanke's "fear mongering" you're so sick of. My guess he has a little bit more data than you have.
In Private, Bernanke Tells Horror Stories
January 22, 2008 04:46 PM ET | Bedard, Paul
People wondering why Federal Reserve Chairman Ben Bernanke suddenly moved to reduce the bank borrowing rate by three quarters of a point should know that in private he has expressed growing pessimism about the economy. Whispers has learned that has told people in recent weeks that the economic situation some see falling into recession will be much worse than he has admitted to publicly.
We're told by those who've heard him that he says the first six months of this year will be "bad," an adjective that some interpret this as signaling there is better than a 50-50 chance for a recession. Even worse, the former Princeton prof believes the ensuing recovery will be "weak" because of persistent problems in the housing market that will result in subdued consumer spending. We checked in with his office, which says it doesn't comment on what the boss says in private. But it's certainly not comforting news considering that his recent public testimony was a bummer, like when he told Congress last week, "Recently, incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth have become more pronounced ... in particular, a number of factors, including continuing increases in energy prices, lower equity prices, and softening home values, seem likely to weigh on consumer spending as we move into 2008."
http://www.usnews.com/blogs/washingt...horror-stories
Yes, but there is fear mongering. Every time there is the slightest downturn in the markets, the media blames it on something that most often does not apply. The fear is causing reduced economic activity.
And for some real concerns. The only thing I see if the fear by business that the democrats will not only control congress in 2009, but the presidency.
Look at the time you must hold capitol gains for the minimum taxes. Nobody who is smart, and things the democrats will rule and raise taxes, wants anything to do with the markets right now. The facts however are that the markets have fair value for the most part. There is no reason for them to decline like they are except for fear. It looks like the dollar has stabilized, but I'm not sure. Right now. Fear... Fear of the elitist pork barrel democrats... That's what OI truly believe right now.
Trust me. If the control both houses of congress, and the executive office... We are in deep ... The players in the markets know it too.
The finanical cowboys have circled the wagons. yee haw!
Insider Bernanke is trying to save his buddies' and traders' fortunes in the ing financial industry, not in the economy.
stock market DOES NOT EQUAL the economy.
Think positively, WC all will "correct" automatically via FSM's invisible hand.
$150B stimulus for an $13T economy? A 1% kicker? GMAFB A pathetic, useless band-aid where the $800 per taxpayer won't be in pockets before mid 08.
Last edited by boutons_; 01-23-2008 at 10:23 AM.
There are currently 1 users browsing this thread. (0 members and 1 guests)
Posting Permissions
