The Tax Rebate Was a Flop. Obama's Stimulus Plan Won't Work Either.

Wall Street Journal ^ | August 6, 2008 | MARTIN FELDSTEIN

[djsherin]

Congress enacted the tax rebate program earlier this year because it perceived a growing risk of recession. In addition, it feared monetary policy alone would not be effective because of the dysfunctional credit markets. As American taxpayers know, most of the rebate checks have now been mailed and cashed.

Those of us who supported this fiscal package reasoned that the program would boost consumer confidence as well as available cash. We hoped the combination would cause households to spend a substantial fraction of the rebate dollars, leading to more production and employment. An optimistic and influential study by economists at the Brookings Institution projected that each dollar of revenue loss would increase real GDP by more than a dollar if households spent at least 50 cents of every rebate dollar.

The evidence is now in and that optimism was unwarranted. Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity.

[P.O.E.]

This omits the stimulus effect of all the money paid to IRS workers for overtime. /sarc

[stuartcr]

As far as I can tell, the only way for govt to pay it’s bills, is by taxes or borrowing. I think tax rebates are foolish and borrowing against our kids futures, is reprehensible.

[Bernard]

The dispensers of magic money were not specific enough in their instructions to the peasants. They wanted NEW spending, not pay off of existing debt due to prior spending.

Next time, they should send a debit card redeemable only for things that people don't need, but will spend the money on because it's burning a hole in the pocket.

Act like an irresponsible tax and spend congresscritter, and boost the economy. Act like an adult and reduce debt, and you disappoint the ruling class.

[Opinionated Blowhard]

Of course it was a flop, as is all government spending. Cut government spending, cut taxes and let the market take care of itself. Both parties, along with our Compassionate Conservative president, are economic dunces who are wedded to a Keynesianism that was discredited decades ago.

[oncebitten]

WIth the Oil bills and college graduations I never even knew I got the refund till I checked my bank statement.

[sheana]

Yep. People had bills to pay, groceries to buy, and gas to buy to get to work.
Surprise, surprise.

[MikeWUSAF]

What tax rebate? I didn’t get one...

[mass55th]

"WIth the Oil bills and college graduations I never even knew I got the refund till I checked my bank statement."

I had hoped to bank mine, but it ended up going to new tires on my car so it would pass inspection.

[djsherin]

You can always print more money and debase the dollar even further, which tends to happen a lot.

[silverleaf]

You need to get in touch with the IRS- unless you make too much money you are due a “stimulus” check for $600

[FFranco]

So, you don’t want taxes cut?

[stuartcr]

Maybe we can compete with the Zimbabwe dollar...

[djsherin]

Couldn’t agree more. I can’t wait till we get someone who actually understands and promotes Austrian economics at least as an alternative to the crap we have now.

[RDasher]

I think the effect of the stimulus checks is hard to measure. Money is fungible, therefore if used it to pay bills, it frees other money to spend on stuff. The problem is maybe that the stuff, was what people would have bought anyway.

My check went into a money market account for future spending :-)

[stuartcr]

I do not like taxes anymore than anyone else, but I believe in paying our bills. We never get the spending cuts that candidates and politicians speak of, so what is left?

[djsherin]

I think we can agree that ultimately spending is to blame and that the lowering of such is what is desired.

[stuartcr]

True, but we probably can also agree that it just never happens enough to make a difference. Usually, the only spending any party wants to cut, is the other party’s spending.

[bert]

How could it possibly be a flop?

We bought a WII, with the pad. We are now improving our wellness and health with the daily exercise program that it promotes.

My Mii looks so much like me, I sometimes can’t believe it, especially when waving to the crowd in triumph.

I ski the downhill slalom nearly every day. No rebate, no skiing.

[stuartcr]

You must be one of the 10-20%.

[adorno]

The Tax Rebate Was a Flop. Obama's Stimulus Plan Won't Work Either.

The only way that the government could have made sure that all of the money in the stimulus package was spent was for the government itself to do the actual payments to retailers. So, rebates would not have been sent out but the payments would've been made directly to the retailers by the government. So, if I wanted a HDTV, I would purchase it and the bill would've been sent to the IRS for payment. That way, every single penny of the stimulus would've been used. The democrats would love that idea since it is they that think that government can spend the people's money better than the people themselves.

[nhoward14]

I didn’t get a check. I am in the “make too much to ever need help” category.

Of course, my senior citizen father needed me to help him file his taxes for the first time in years so he could get his “rebate”.

If not for certain commandments from God, I would have camped out by his mailbox waiting to get MY money back.

[KarlInOhio]

It was awfully nice of the government to borrow $1200 from the Chinese so they could send me $600 I used to pay down my home loan. Thanks a lot guys.

[jwparkerjr]

True to their nature the congress critters enacted legislation that was designed to help them stay in office, not legislation directed at a stimulus. They use their power of the purse to buy our votes election after election.

If their primary goal had been to stimulate the economy by getting more money into the pockets of Americans they could have done it without all the posturing and months and months of delay. All they have to do is cut the gas tax, and if that’s not enough then cut the FICA bite, and then the withholding for income taxes. This would put the money directly into the pockets of Americans the very moment it was passed and signed into law, not months and months later. Give the money back to the people whose money it is to start with. Every rebate they come up with, every stimulus package is nothing more than yet another way to take the rich and give to the poor.

And cutting the tax bite would not have the tremendous overhead that sending out checks to everyone has.

Until we find a way to stop them from using our own money to buy our votes it’s not going to improve.

[bcsco]

What tax rebate? I didn’t get one...

Neither did I. It went to the VA for medical expenses.

[FFranco]

The theory is that if taxes are lowered, then spending will go down so expenses meet revenues. Therefore, according to this theory taxes should be cut first.

Part of President Bush’s greatness is that he is the first president in the history of America (maybe the world) to lower taxes in time of war. Unfortunately, the Democrats (and some Republicans) in Congress refused to reduce spending, which has resulted in increases in budget deficits and a larger national debt (though as a percent of GDP, the national debt is fairly small, but growing).

[stuartcr]

As I said, spending cuts just don’t happen the way we’d like.

[MikeWUSAF]

Thank you for your service!

[bcsco]

There are those who did far more than I who deserve your thanks.