The stimulus package is a crock

by Rocket Finance

We talk about taxes quite a bit on rocket finance. I am generally in favor of any type of tax cut and/or reductions in government spending. Naturally, I have received several questions about the tax rebate that is part of the government stimulus package.

Here are some of my comments and opinions:

  1. My family and I will qualify for the maximum
  2. Find out if you qualify at Consumerism Commentary.
  3. The stimulus comes at a good time for my family, we might be paying rent and a house payment for the next few months.
  4. I wonder why liberals all of a sudden believe that it is a good idea for people to have money to spend, yet they typically prefer taking money in the form of taxes? Why did the money have to be cycled through the federal government?
  5. The stimulus will do very little to help the economy in any meaningful way.
  6. Why didn’t they just cut taxes worth $168 billion?
  7. I would prefer that the 2003 tax cuts were made permanent. This would stimulate the economy for the long term – even though it might cost me $1,500 in the short-term.
  8. If our government has $168 billion to give away, I wonder how much more money they have that they don’t really need?
  9. If our government has $168 billion to give away, why did they take it in the first place?
  10. This plan is really just a wealth redistribution scheme. The people who are going to receive “rebates” are not the ones who earned the money in the first place.

I would rather see taxes cut for employers and corporations. This plan will buy a lot of votes for a lot of Congressmen.

I’m happy for them.

  1. 15 Responses to “The stimulus package is a crock”

  2. By Randall at CreditWithdrawal on Feb 19, 2008 | Reply

    Glad to see you’re not pulling any punches on us ‘poor liberal rapscallions’. You know, we’re descended directly from Robin Hood and the Merry men, if you must know. 🙂

    Ok, the $64k question I have; What would guarantee that any tax cuts for employers and corporations would actually make a difference to the employees?

    I can’t remember ever receiving a raise because capital gains was cut, or the corporate tax rate was reduced.

  3. By rocketc on Feb 19, 2008 | Reply

    So what do you think happens to the money when corporate taxes are cut?

  4. By Randall at CreditWithdrawal on Feb 19, 2008 | Reply

    Goes out as profits to shareholders, reinvested in the business, etc. Just not as raises to employees. If you’re a shareholder, that’s a good thing, if you’re not. Make do on your salary.

  5. By plonkee on Feb 19, 2008 | Reply

    Corporation tax cuts go in the extra profit section of the accounts. That doesn’t necessarily mean that they are bad, a more profitable business may well mean greater job security.

    And this liberal thinks your tax cut is stupid. 🙂

  6. By rocketc on Feb 19, 2008 | Reply

    @ plonkee: most liberals think tax cuts are stupid, I don’t understand why they oppose tax cuts until they are blue in the face and then jumped on the “rebate” package with nary a wimper.

    @ randall: profits for shareholders are always good for the economy and they do result in raises for the employees who are worthy of more investment. . . sometimes they come in the form of more employees. . . somtimes they come in the form of new jobs. It is capitalism, you won’t automatically get a raise because there was a tax cut, but now a business might expand in your area and your services could become in greater demand as a result of lower taxes. That is just one example.

    I can point to examples of countries who “tax cutted” themselves into prosperity, but I wonder if there are any examples of countries who “taxed” themselves into prosperity?

  7. By Randall at CreditWithdrawal on Feb 19, 2008 | Reply

    If you read my post today, you’d know I thought the rebate was stupid too. Liberal and Conservative agreeing on something?? Isn’t that like the 4th sign of the Apocalypse or something??

  8. By rocketc on Feb 19, 2008 | Reply

    I think that you and I have the best interests of the country at heart. . .not so sure about Congress.

  9. By Deamiter on Feb 20, 2008 | Reply

    You’re all missing the basic reason for the rebate — the American government can no longer afford to allow the stock market to slump significantly. Social security is unfunded and insufficient to cover living expenses and since Reagan, we’ve cut defined benefits pensions in favor of 401(k)s and the like.

    Not only is the average American grossly underfunding their own retirement, they’re putting the vast majority of their money into the stock market through tax-advantaged retirement accounts.

    No matter how stupid in economic terms, there will be a huge number of uninsured seniors living on social security alone even if the stock market does well! If the stock market does poorly… there will be a whole lot of competition among 70 and 80-year-olds for jobs that aren’t physical and don’t require recent education or qualification.

    At some point, the large number of poor elderly with failing health will become too large to ignore. At some point, simply letting them wallow in their mistakes turns into a human rights violation.

    I hate the tax cuts as much as the next guy, but the problem is a combination of the move to put responsibility for retirement onto the workers and a few generations that haven’t been taught that saving isn’t really a choice any more. That makes propping up the stock market by stimulating spending a necessity if the government wants to avoid the high costs of starting a universal pension.

  10. By Deamiter on Feb 20, 2008 | Reply

    Erm — note when I said “tax cuts” at the end there, I meant “tax rebates.” I’m all for tax cuts, though I’d like to see us get out of debt first so we can stop paying 200+ billion in interest each year.

  11. By Deamiter on Feb 20, 2008 | Reply

    @ rocketc — I don’t really see how throwing more money at shareholders helps anybody but the 10% of American investors who own 90% of the shares. If wealth were distributed more evenly, there would be a much greater effect, but all you achieve now is to further separate the rich and the poor.

    I have no doubt you could raise the average standard of living by throwing more money at shareholders, but it would be purely caused by inflating the wealth of the top 1%. The median standard of living would continue to drop.

    As for slashing taxes to become wealthy, that only works if the economy is poor and tax cuts can attract existing companies from other countries as recently happened in Ireland. Of course, we’re largely losing industry to countries that have some of the worst health care and living conditions in the world. We can’t just attract companies from the rest of the EU as Ireland did — we’d have to compete with China and Singapore. I shudder to think of how poorly we would have to treat the majority of Americans to be able to attract industry from THOSE countries!

    After all that, I’m sure I’ve been painted as a bleeding liberal in your mind, but I should be clear that I’m a big fan of tax cuts and I quite agree that our government is too inefficient at the moment to justify the current levels of spending. I’m just not impressed by partisan arguments saying that tax cuts are always good or that universal health care will act as a panacea. To every policy, there’s a down-side and at the moment, I’m afraid that we’re looking at a larger problem in the sheer number of under-saving, aging baby-boomers than in losing basic manufacturing to Singapore. I’d LOVE to say they just need to live with their mistakes, but the reality of what it means to allow our elderly to choose between food, shelter and health-care makes me think twice.

  12. By rocketc on Feb 22, 2008 | Reply

    I think you have three problems with your thinking:
    #1 You are looking to government to solve these problems – government is the problem.
    #2 Actually over 70% of the American people own stock. If we increase the profit margin in the stock market, more people will own stock and the small stockholders will increase in wealth.
    #3 The gap between the rich and poor is a fallacy. The rich are certainly getting richer, there is no doubt of that – and it is a good thing. The level of the poor is remaining constant, it always will, but you are always cycling people through that strata. The great thing about the US is that you do not have to remain poor. Bill Gates was not always rich and the richer he got, the more millionaires he created through his products. You don’t lift the poor by tearing down the rich.
    #4 Unleash the power of a market driven economy and we will not have to depend on manufacturing jobs. The workplace is constantly changing – we no longer have blacksmiths or seamstresses either.

    I don’t necessarily think that you are a bleeding heart liberal, but I believe that you are too pessimistic and have bought into some liberal assumptions.

  13. By Deamiter on Feb 22, 2008 | Reply

    #1 If the government were the only problem, we’d all be saving for retirement and you wouldn’t have 40% of Americans giving up on matching 401(k) contributions! You seem to assume that the average American will make rational choices — the level of personal retirement savings does not support this assumption.

    #2 I didn’t say only 10% of Americans own stock. I said 90% of all stocks are owned by a tiny minority. Throwing money into the stock market by cutting corporate taxes will slightly benefit the 70% of Americans who own stock, but it will even further push the median net worth lower than the average as it inefficiently gives the majority of the money to the 1% who own most of the assets.

    #3 Do you understand the concept of average and median values? The median net worth has been moving further and further below the average net worth which clearly demonstrates that the gap between the bottom HALF (not just the poorest) and the very richest is increasing. I’m not sure where you find a fallacy in there — if you don’t understand medians, just let me know and I’ll back up and try to make my point another way.

    No I don’t see any problem with the rich getting richer. I also agree that the poorest will always stay right around zero. When the bottom half gets pushed further and further from the average, the majority of the people are not benefiting from the current economy or policies.

    #4 I quite agree a market driven economy is a decent system and doesn’t require manufacturing jobs. The point was that unlike countries like Ireland who attracted manufacturing jobs by slashing corporate tax rates, there are very few corporations that the US CAN attract by cutting corporate taxes. I’m not saying corporate tax rates should stay high because of this — you just brought up that many countries become wealthy through cutting taxes, and I was pointing out that such a strategy has only worked in specific cases and America is not currently in an analogous position.

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