I am sure all of you have heard the news recently concerning the worries about the economy heading towards or being in a recession. The pundents are preaching doom and gloom and the news is scaring everyone, which is what news stations love to do. Not to say that I disagree about the recession part; it is my personal and humble opinion that we are in a recession. Also, two years from now when all the data is in the National Bureau of Economic Research, it will show that maybe from middle 2007 to about year end 2008 we are in fact in a recession. But that is not my topic of choice today, I would like to touch on the news of President Bush’s proposed tax rebate to help stimulate the economy.
The proposal is a $600 rebate for an individual and $1200 for a family. The hope is that the consumers will turn around and spend this money in the economy, thus stimulating growth. Yeah I know, there are more business cuts and such, but the big news is the rebate for the consumer. I would like to point out a major and fatal flaw of the rebate program as a stimulus package: it is a one time rebate! Providing a person with $600 or $1200, depending on the situation, in the beginning of the year will not create a change in the consumers individual long-term spending. In order for the stimulus package to work, you need to provide the consumer with a long-term change in there income in order for the consumer to feel comfortable changing their spending habits.
Think about this as you finish reading the post, what would you do with the $600 or $1200 dollars that the government plans on giving to you for 2008? Are you going to increase your spending for the year? Maybe buy a new car or some fancy new electronics? Or will you spend it on some bills or simply just save the money? Me personally, I know we will save it if we get it. I may go out and spend a small portion of it but the money is not long-term nor is it substantial enough for me to change my spending habits.
Sorry Mr. President but you need to do a little something more to stimulate an economy. Or perhaps this is just a political stance to help give your fellow Republicans a little positive press going into a crucial election year.