President Bush and Federal Reserve Chairman Ben Bernanke today endorsed the idea of an economic stimulus package to boost the flagging economy, as Bush began discussions with congressional leaders on the next steps.
Both parties support tax rebates for individuals, to get cash into consumers’ hands quickly. Democrats would also like to increase funding for food stamps and extend unemployment benefits, while Republicans want to allow businesses to accelerate write -offs of equipment purchases and other capital expenditures.
On Friday, Bush plans to make a more public announcement about the possible stimulus package, but will anything help? Or is this simply trying to put a band-aid on a major wound? What do you think?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
Democrats need to get over their fears and egos and support Obama and the Republicans need to know that they will be voted out if they continue to be obstructive and think trickle down still works..that is what got us into this mess.
This country is toeing the line of communism. Common sense tells us there is nothing like "free-money". And intervention by giving the citizenry free-money will only leave the country in more debts. And exactly what the elite bankers of this nation wants. A country indebted to them !
For stimulus to help, it needs to be immediate.
I would prefer policy try to free the American Serf....the 40% of the population in debt for health insurance and education. Other rich democracies PROVIDE this with taxes so the individual has after tax income sufficient to own a home. If the government paid for education completely, trade school and college, and let the Ivy's and privates pay for scholarships to these "elite" schools, the middle class would actually see some real help.
Likewise, if the "policy" makers were not all millionaires, they would see that giving the entire US citizenry the same health insurance plan the congress gets is in place, immediately could be scaled up, and would rapidly generate savings that were "real" to the population.
Instead they are going to diddle with their self- inflicted tax code that keeps the accountants employed and gives them their favorite tax breaks, but leaves the 40% of the American population without help since they make so little they don't pay tax anyway.
What we are seeing is the way the neocons have turned the United States into the "New Brazil."
Huge income inequality a worthless dollar and NO EXIT.
The government wants to give us rebates to encourage spending? Spending is what got us in this mess in the first place. What is $800 dollars going to do in the long run? Maybe pay off a credit card bill or two, maybe a payment or two on your car. But what happens 3, 4, 5, 6 months from now when we are back in this situation? Are they going to issue another rebate? IF the government wants to do anything they should lower or eliminate corporate taxes to help stimulate growth in the corporate sector which may provide more jobs and or provide cash flow for corporations so they dont have to BORROW much from banks. A tax cut on the corporate level may also bring TRUE manufacturing BACK into the U.S. which will provide more jobs.
The government can't fix this mess by handing out rebates or cutting interest rates - people aren't going to spend - we're in a recession.
Since banks are tightening credit, it's going to be difficult for those in dire straits to be able to borrow and spend (ie: put it on plastic or use their homes as a piggy bank). Only those with sterling credit (and large corporations) will be able to take advantage of rate benefits.
And how do hand-outs create jobs? People in the rust belt or the home manufacturing industry that have been displaced from their jobs need work, not a check for a couple hundred bucks. The government should help these people meet their basic needs (food, shelter) as well as find them sustainable employment.
The problem is that we are always trying to fight natural market forces with short-term remedies, which just artificially inflates the state of the economy. The goal should be through long-term policy changes so that the market can gradually correct itself.
Putting free money into the hands of people is about worthless. For one, smart people (while I think that is the minority) will simply save the money or apply it towards something that doesn't constitute consumer spending. And on the other hand, people who do get the free money and go spend it probably aren't in a position to be buying frivolous things. The government is basically encouraging people to spend money on things they don't need, which is largely responsible for the mess we're in to begin with.
Working Dollar mentioned it, but the market goes through cycles. We have gone through the same type of cycles for as long as the economy itself. You can't have an economy that always goes up or always grows, especially when it grows out of control due to various bubble effects. Trying to negate these market forces will ultimately do more harm than good.
Easy money is what creates bubbles, it doesn't ease the popping. Rebates were included in the 2001 Bush Tax Cuts and studies showed only about 25% of the money was used for consumer spending, most went to paying off debts or savings. Of course this is good for consumers, but doesn't stimulate spending, which is their intent.
Time will tell. however, this package was introduced/announced yesterday, and certain details were released, and the market still dropped over 300 points.
The economy has a very readable cycle. Economists call this cycle exapnsion, peak, contraction, trough. We are currently in the contraction cycle, and are about to be in the trough in about a year. If unemployment cycles down over the next two quarters, then we will move into the trough (recession). Not trying to be a naysayer though. ;-)
As far as I see it - the whole reason for this mess is an asset bubble, created by interest rates being too low for too long. We've also been told ever since 2001 that the consumer has to prop up the economy and spend, spend, spend to keep the economy going. This government rebate is just more of the same reckless spending that got us into this. Meanwhile, the dollar goes lower and lower and what little assets people own are worth less and less.
The government needs to start thinking about long term fixes and long term stability. An economic stimulus package is a short term band aid fix. We have to start living within our means and not living on payments.
I still think it's amazing that the government still want to give out handouts when they are in more debt than any company or person all combined! So pretty much we are suppose to bankrupt our nation for some dumb banks that couldn't forecast correctly?
I come down hard against rebates. It is a waste of taxpayer's money to send us a check in the mail. All that administrative stuff that has to be done before I get a check--just tear it up and that about covers the cost to get it together and mail it to me.
That said, for those families really struggling, more food stamp support may help them out. Depending on the details of this and the unemployment benefits extension, this may be useful.
I would like to see more ideas as well because if they want me to spend, I need more incentive than a rebate check. I also make more than allowed to receive food stamps. How will the stimulus package benefit middle class people?