By Katie Hudson-Martinez/feature editor
Like most Americans, I am counting the days until my stimulus check arrives. As a family of four, my household stands to receive around $1,800 of seemingly free money—but is it really?
The stimulus package, which the Bush administration believes can save us from a recession, will cost more than $150 billion.
Just preparing and mailing the letters to taxpayers informing them that they will be receiving a check will cost taxpayers $42 million.
And just to clear the air of any hopeful misconceptions, this money is an advance on next year’s income tax refund, a loan if you will. It is not magically appearing free money.
This strategy for boosting the economy has several major flaws, but the biggest being that we absolutely cannot afford it.
The United States is facing the largest deficit by far in its entire history. Our country has literally surpassed bankruptcy and has moved to a level we could call super- or mega-bankruptcy. The stock market and consumer confidence levels continue to decline along with the value of the dollar.
The value of the dollar is declining because of our massive national debt. Sorry to be a party pooper, but wouldn’t a more reasonable strategy be to temporarily raise taxes, trim the fat out of the bureaucratic budget and pay down some of this debt?
Instead, we are apparently doing the complete opposite and spending billions more that we don’t have.
This brings to mind a certain phrase made famous during the Bush/Gore debates of 2000—fuzzy math.
When it comes down to it, this stimulus package is just another temporary, unsustainable rig-job to prop up an economy that is teetering around on one flimsy leg.
How much more can we dig ourselves into a hole before we are forced to look at the broader implications?
Yes, we can take the money and some will hit the mall with it, or take a weekend getaway. Many others will pay bills or put it in the bank. In the end, that money will dissipate very quickly and we will be worse off than when we started.
What will happen to the economy next year when no one is getting a tax rebate because we already spent it the year before?
So, yes—I will take my $1,800, but it feels like blood money. Others have called it “imaginary money.” Whatever you call it though, it’s not nearly as fabulous as it seems because we are going to pay for it in the long run.
By David Boyd/reporter
Billionaire Warren Buffet, named the world’s richest man by Forbes magazine, believes we are in a recession. Buffet was not the first to make such a declaration, but when a respected investor like the “Oracle of Omaha” says something like that, it draws attention to the issue at hand.
Technically, we must experience a measurable economic decline for six straight months before the downturn can be called a recession. We have not met the timeline criteria, but with rising fuel costs driving up prices on raw materials, food, travel and almost everything we purchase, it is hard to argue with Buffet’s assessment.
Stack the rising goods prices alongside the crumbling housing market, the weakened dollar, the banking scandals and the recent rise in unemployment and some say we may even have a return of stagflation.
The Economic Stimulus Act of 2008, a bipartisan plan passed by Congress and signed into law Feb. 13 by President Bush, attempts to jump start the floundering economy with expansionary fiscal policy through tax rebates and business incentives.
Tax rebates of $600 per tax payer for lower and middle class individuals are the most well-known portion of the stimulus package, but the plan also involves a tax deduction to entice businesses to invest in qualifying, long-lived assets as a way to encourage growth.
Opponents in Congress were few; after all, who wants to be seen by voters as the one who blocked a tax rebate? But media pundits and some economists have criticized the plan. Macroeconomists point out government intervention may have only short-run benefits. But the short-run economy is what we are living through, and a hands-off approach could lengthen the painful process of climbing out of the hole.
Success of the tax rebate plan hinges on the hope rebate recipients will immediately put their new money back into the economy and make purchases they had put off because of rising prices and diminished consumer confidence. If history is any indicator, most will. A similar, but smaller, tax rebate helped the economy recover from the 2001 recession and could work here.
Quick fixes don’t exist, and the solution will come only through coordinated efforts with the Federal Reserve, our central bank. Federal Reserve Chairman Ben Bernanke actually called upon Congress to take action before the stimulus package was even proposed.
The Fed has done its part by keeping the federal funds rate low, but lower rates from the Fed can do only so much. The stimulus package was needed to provide a one-two punch for knocking out the recession. It may succeed or it may come up short in its goal, but not trying ensures failure, and a pending recession is no time to forfeit.
