Bi-Partisan Economic Stimulus Plan Solidified
By Justin Gardner | Related entries in Democrats, Economy, Money, RepublicansWhile I’m not necessarily in favor of stimulating the economy by going further into debt (huh?), I do like the compromise they came up with. The people at the bottom will spend the money they get immediately, and that’s the quickest way to see a fast uptick. And if that’s the goal, well, it’ll probably succeed.
WASHINGTON (AP) - Democratic and Republican congressional leaders reached a tentative deal Thursday on tax rebates of $300 to $1,200 per family and business tax cuts to jolt the slumping economy.Congressional officials close to the negotiations said House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio reached agreement in principle in a telephone call Thursday morning. [...]
Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining rebates of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.
Families with children would receive an additional $300 per child, subject to an overall cap of perhaps $1,200, according to a senior House aide who outlined the deal on condition of anonymity in advance of formal adoption of the whole package. Rebates would go to people earning below a certain income cap, likely individuals earning $75,000 or less and couples with incomes of $150,000 or less.
What are you going to do with your rebate?
This entry was posted on Thursday, January 24th, 2008 and is filed under Democrats, Economy, Money, Republicans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 24th, 2008 at 11:42 am
All of this is just a short term fix. And truth be told, it has been happening over past 3 decades. Reagan and Clinton have just as much blame as the current administration. This is an interesting perspective on this(the midas touch)
January 24th, 2008 at 12:14 pm
This is terrible - I am never in favor of the government providing economic stimulus unless it results in long term infrastructure gain…ie: build schools, roads, bridges, hospitals, etc…. This type of stimulus results in no long term gain, further increases debt, and only adds to the problems of poor “internals” in the US economy. It’s a bribe to many of us that allows the incompetents to look like they are actually doing something. Economic cycles occur - they have to occur in a capitalist system such as ours. People need to realize this, save for it, avoid ruinous debt (credit cards), live within your means. The government (especially this government) has very litle impact on these things - they should just stay out of it!
January 24th, 2008 at 12:20 pm
Invest in the stock market.
January 24th, 2008 at 1:34 pm
“While I’m not necessarily in favor of stimulating the economy by going further into debt (huh?), I do like the compromise they came up with.”
While studying macroeconomics, the dirty secret is that targeted deficit spending of about 1% of GDP stimulates the economy. Probably why congress seemingly waived the pay-as-you-go rule on this one.
The AP article doesn’t describe the plan as clearly as it should, but heres a better article:
http://money.aol.com/news/articles/_a/deal-reached-on-tax-rebates-in-june/20080124095609990001
quote
”
Individuals who pay income taxes would get up to $600, working couples $1,200 and those couples with children an additional $300 per child under the agreement. Workers who make at least $3,000 but don’t pay taxes would get $300 rebates.
The rebate part of the plan would cost about $100 billion, aides said. The package also includes close to $50 billion in business tax cuts.
”
end quote
I’m going to have to give this one a 80/100. With a tax rebate stimulus, the best way to do it is to put it into the hands of people who are almost guaranteed to spend it, e.g. the unemployed, the poor and lower middle class, those with kids, those in a higher cost of living area.
So the plan is on the right track with giving it to those who don’t pay taxes and those with kids. However the $600 part for those who pay taxes and $1200 for working couples seems like, depending on the details, not all that money is going to get spent and some of that will get saved in checking accounts (for fear of unemployment reasons), or into financial investments e.g. stocks, bonds, cds, other assets. This is where a problem is.
Not to wander outside of the middle, but the dems got a better plan here with there plans on umemployement benefits, and etc. However a tax rebate focused on the poor and lower and mid middle class is not a bad middle of the road plan that I would have liked to see pass.
January 24th, 2008 at 2:55 pm
Historically, these kinds of tax rebates do almost nothing to stimulate the economy. People either put the money in savings or use it to pay down debt. I, for one, will be paying down debt which won’t add a single cent to the ecomony.
Almost all economists agree that if you really want to stimulate the economy you have to make more permanent changes in people’s earnings.
Also, last time I checked, people making over $75,000 are just as likely to spend a rebate as people making under. Is excluding them just a shout-out to the anti-wealth side of the Democratic party? $75,000 is a really low cap. I mean, at that point it’s not really a stimulus package, it’s wealth redistribution.
January 24th, 2008 at 4:38 pm
Those who fail to remember history are doomed to repeat it.
We are repeating it. Back in the mid 70s, President Ford & his Congress also passed a tax rebate similar to this one. Guess what? The economy continued to slide over the next 6 years, with unemployment peaking at about 11% & inflation upwards of 14% in the early 80s. Same old. . . expect the same result.
January 24th, 2008 at 5:02 pm
[...] « Bi-Partisan Economic Stimulus Plan Solidified [...]
January 24th, 2008 at 8:18 pm
Shhh… Don’t tell Justin. Its a secret!!!
January 25th, 2008 at 11:16 am
What incenses me about this “bi-partisan” plan is how the democrats - once again - got their way in giving non-payers a tax rebate. Why don’t they call it what it is? A handout! In addition, those who paid taxes and dearly, but are in the unfortunate over the $75,000 income bracket get punished!
Time and again, achievers are penalized and the irresponsible ones are rewarded.
Imagine being already on welfare, having a bunch of kids and racking up $300 for each one…That’s fair for dems!?
January 25th, 2008 at 11:30 am
Ken writes: So the plan is on the right track with giving it to those who don’t pay taxes and those with kids. However the $600 part for those who pay taxes and $1200 for working couples seems like, depending on the details, not all that money is going to get spent and some of that will get saved in checking accounts (for fear of unemployment reasons), or into financial investments e.g. stocks, bonds, cds, other assets. This is where a problem is.
The problem - from my vantage point - is that it’s none of the government’s business what people do with their own income, or tax-rebates. Neither is yours.
It’s socialistic mentality that aims at taking from those that work hard to give to many that already bleed the system. If liberals want to donate their own income, fine by me. However, stop telling the rest of us what you plan to do with OUR OWN money!
I give to charities I choose and because I so determine. It’s not your job to direct my money or anyone else’s, for that matter, where “you see fit!”
January 25th, 2008 at 11:33 am
Ken writes: So the plan is on the right track with giving it to those who don’t pay taxes and those with kids. However the $600 part for those who pay taxes and $1200 for working couples seems like, depending on the details, not all that money is going to get spent and some of that will get saved in checking accounts (for fear of unemployment reasons), or into financial investments e.g. stocks, bonds, cds, other assets. This is where a problem is.
The problem - from my vantage point - is that it’s none of the government’s business what people do with their own income, or tax-rebates. Neither is yours.
It’s socialistic mentality that aims at taking from those that work hard to give to many that already bleed the system. If liberals want to donate their own income, it’s fine by me. However, stop telling the rest of us what you plan to do with OUR OWN money!
I give to charities I choose and because I so determine. It’s not your job to direct my money or anyone else’s, for that matter, where “you see fit!”
January 25th, 2008 at 3:05 pm
Elisabetta writes:
begin quote
The problem - from my vantage point - is that it’s none of the government’s business what people do with their own income, or tax-rebates. Neither is yours.
It’s socialistic mentality that aims at taking from those that work hard to give to many that already bleed the system. If liberals want to donate their own income, it’s fine by me. However, stop telling the rest of us what you plan to do with OUR OWN money!
I give to charities I choose and because I so determine. It’s not your job to direct my money or anyone else’s, for that matter, where “you see fit!”
end quote
I mean not to sound like what I’m telling you what to do with you money, but thats exactly the kind of problem that makes this kind of stimulus a low B grade (at most) stimulus. Even through this kind of tax rebate is popular with the battleground middle class.
To put it simple terms 70% of our Real GDP is consumption, so to boost the economy this money needs to be spent, not saved or put into financial investment (business investment are different).
I’m saving my rebate money and buy some stock. Its not good for the economy however soon it will be a great time to buy some stock and go long.
January 25th, 2008 at 5:29 pm
We all want the economy to rebound. The issue is HOW to accomplish that goal. Liberals want to raise taxes and give rebates to non-payers; Republicans favor lowering taxes and returning to those from whom it has taken.
I believe the latter is best. Naturally, there also has to be a cutting back of spending and elimination of programs that only make people more dependable on the goverment.
Ken, I know for a fact you are not gonna decide how I spend my money. Nonetheless, that’s exactly the crux of your proposal.
January 25th, 2008 at 10:40 pm
Actucally liberals want to use the stimulus to go to unemployment insurance, food stamps, and infrastructure improvement. I agree with them. That would be more effective, since that is all consumption related (remember 70% of GDP). Also bring more bang for the buck, and cost less. Reason why is because a tax rebate doesn’t guarantee spending due to people’s marginal propensity to consume and save, meaning that every dollar you receive some it gets spent and some of it gets saved.
So if the government does a tax rebate plan, to make up for the money thats gets saved you would have to do a much more costly tax rebate plan. So if you want lower taxes, then your should go for a government spending program. A $70 billion spending program would be just as effective as a $150 tax rebate program. A savings of $80 billion, or about $260 per capita, and probably even higher per taxpayer.
This is why cutting taxes is not always best for a stimulus plan. Remember this is a stimulus plan to BOOST the economy not to put money back in your pocket, which would be nice but defeats the purpose of the plan.
Also I agree with you on reducing people’s dependence on government. “Safety net” programs should provide people a stepping stone to getting people back on track to being independent of government. After benefiting from programs like welfare, people should have a payment plan set out to pay back benefits they received, e.g. welfare checks, student grants, food stamps. This would bring lesser taxes, and the ability to help more people with these programs. I say this as someone who has benefited from gov’t programs. However this is another debate.
January 28th, 2008 at 12:34 pm
Ken, no need to ‘thank me.’ Your words were not taken out of context (on ACS’ thread).
{Sic}“Actucally liberals want to use the stimulus to go to unemployment insurance, food stamps, and infrastructure improvement.”
Case in point. While we agree on a few isolated points, most of what you support benefits the non-payers to the disadvantage of the payers.
It’s evident that tax-rebates are a short-term solution. However, I differ with the notion that high-income earners do not reinvest in the economy. The fact they appreciate the benefits of saving should not be seen as a strike against them. Perhaps, if the non-payers learn to save too, they would reorient their entitlement mindset. After all, how can people appreciate the fruits of their labor if they don’t work for them?
Your assertion that lowering taxes is bad for the economy is liberal propaganda, with no basis whatsoever. Factually, anytime taxes are lowered people go out spending and investing, and that stimulates the economy. Stopping or limiting the creation of new programs would also boost the economy and push more “able and capable individuals” into wanting to earn a living. People need to be educated that the government is not there to bail them out whenever they make a bad decision (i.e. living beyond their means: purchasing mortgages they cannot afford, using credit cards they can’t pay back, etc.)
The repayment plan for many government programs is a wonderful idea. Nowadays, a huge number of people still overlook the reality that government programs are only possible through people’s taxes. The government produces no money of its own, and that should be compellable to drive people to self-responsibility.
If you and other liberals feel the obsessive urge to give your money away indiscriminately, by all means return your tax rebate and VOLUNTARILY pay more taxes. Otherwise, stop supporting or promoting the creation of new ways for the government to take hold of our money.
January 30th, 2008 at 7:40 pm
I’ve been negative on the whole economy for some time now. The housing market and everything financial tied to mortgages is in bad shape. You know that, but it looks worse on the inside of the industry. You have major institutions going out of business. MAJOR institutions. Foreclosures are going through the roof and a glut of homes are on the market. We have around 10 months of inventory on the market right now, plus a decreased demand for those homes. In addition, a good portion of the demand for those homes can’t get financing.
The savings rate for Americans has dipped into the negative for the first time since The Great Depression. We are seeing the worst housing slump in the post World War 2 era. Median home prices on a national level have not dropped since federal housing agencies began keeping track back in 1950. I don’t have the figures, someone help me out on this if you know, but I don’t believe they have dropped since The Great Depression. To top it off, Edgar Cayce’s cycle of recessions and depressions predicts the next great downturn to occur right about now.
With all that said (and I could continue, believe me, I could), I see a glimmer of hope in this stimulus package. I have a few posts regarding the benefits of this package, take a look and let me know your thoughts.