The President is calling for an economic stimulus package based on “tax cuts and rebates”. Tax cuts good, rebates bad.
Congress is working on a “stimulus” plan for the poor. Bad; period.
First, the rebates are money that has to be borrowed by the government to pay out. Many of those rebates will go to people that already don’t pay Federal tax, and worse, get tax back, even though they don’t pay any tax. The only way rebates work is if you reduce government spending in the same amount. There has been talk about a 100 BILLION dollar program, so where are we getting that money if we don’t cut spending? We will increase our debt. We continue to be selfish and continue to steal from our children’s future economic opportunity.
Second, a plan for the poor is not how you stimulate an economy. You incentivize the people that invest and create jobs. The poor already have programs that continually add to the debt. Adding to that debt is not a good idea. Job creation is the economy’s engine, not increased debt and government programs. Will people have a few extra bucks to spend? You bet. But all you have done is “stolen” future economic growth by borrowing the money. And besides that, I thought this was a crisis created by mortgage defaults. How many poor people have a mortgage? (This is not a posting about the poor, it is about the economy so don’t take this as a statement of my feeling about the poor please. It is just that they have little to do with the current economic slowdown)
My last point is a comment on Nancy Pelosi’s solution below:
House Speaker Nancy Pelosi said she wanted legislation enacted within a month and said the government must "spend the money, invest the resources, give the tax relief in a way that again injects demand into the economy, puts it in the hands of those who need it most and into the middle class ... so that we can create jobs."
Sorry Nancy, if government spending was the solution to problems in the economy, why not do it all the time? Why are we talking temporary? Because it is not a solution, it will compound the problem. Cut taxes for people that pay them, and cut the tax rates for job creators. The market will react and react fast and furious.
The market wants to be confident in the direction and permanency of taxation; and if taxes go down, markets go up. It is simple for those that understand even the most fundamental economic principles. The problem is; there are very few politicians that do. Just a thought…