February 2, 2009
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Stimulate my Economy, Please!
I have to admit, I really don’t know much about proposed economic stimulus plans. I’ve been trying to catch up, so I went directly to the source (and by that, I mean barackobama.com) to see what the deal was. Well, apparently the Prez and Veep are going to directly inject (oh I hope it won’t hurt) $75 billion into the economy in the form of tax cuts and direct spending. The article I read wasn’t exactly specific, and since I’m not really in the mood, I didn’t dig any further. Now, this is not my blog that tries to subtly say, “I hate the president.” I don’t. I’m reserving judgment, since, well, nothing has really happened yet (and this isn’t one of those questionably subtle digs). What I don’t understand is how $75 billion in tax cuts for working families and seniors is going to boost our economy. I understand living paycheck to paycheck and I understand that a lot of families are not able to do so because of unemployment, rising medical costs, tuition payments, etc. But how does a $250 tax cut make that possible? This isn’t really money back into the pocket of the working family, it’s money they didn’t have in the first place, and money they still won’t have even after the cut. We are in debt. We are losing our jobs, our houses. We’re struggling to put dinner on the table.
Okay, so a tax cut means that an individual, or family, will owe less money to the government. Okay, that sounds good. Well, most of us have money removed from our paychecks each pay period to account for those taxes. So, this means less money is taken from the paycheck and more goes home with us. Pretty simplistic, I know, bear with me, I’ve never taken economics, though now I know I should. Okay, so I’m assuming the $250 tax cut is just a one shot deal, meaning that over the course of a year, whatever we might owe the government in income taxes is now reduced by $250. I get paid weekly, which turns out to be $4.80 less each week that I would owe the government, or $20.83 a month. I can buy a tank of gas for that much, will that be enough to stimulate our economy? Wikipedia tells me that the idea behind a tax cut is to have taxpayers spend money on commodities sourced from within the country. Is one more tank of gas enough to do it? In all likelihood, I don’t need that extra tank of gas anyway. But let’s go back to the working families and individuals who are going into debt because they can’t pay their bills between paychecks. Is that $21 a month enough to help them make ends meet?
I really hope that I’m missing something. I don’t pretend to be an expert. I have no idea how to fix our economy. But what I do know is that when our economy wasn’t quite the downer it is now, credit was extended to those that had no business taking it, mostly in the form of home loans. These people, however hard working they might have been, didn’t have the capital to support the purchase. They couldn’t make the payments and the banks suffered. Our “American Dream” backfired. We are driven by so much consumerism that it blinds us. Where is it written that we need to own a home? I’m obviously failing at life because besides not being able to afford one, I don’t want to have my own house right now. Nothing to do with the market, but there is a lot of responsibility that goes in to owning a house, and that means a lot of money. Roofs leak and get blown off in hurricanes, pipes explode, termites invade, foundations crumble, whatever, the point is, you’re liable for it. I know I can’t handle that right now, so I stay away.
Why do we go out of our way to spend money that we don’t have?
Comments (5)
This isn’t to say I’m against tax cuts. It could work, it did for Reagan, though the national debt tripled, but that’s just an imaginary number anyway.
The problem, as you stated, with most tax cuts is that they aren’t cut enough. We severed ties with England over a comaritively tiny amount in terms of taxes (granted, there were other issues in play as well like religious freedom and that we wanted the States to have the right to make legislation against slavery) In effect, we are now paying more and continuing to further limit our ability to tap into our own resources (which would allow us to stimulate our economy while harvesting said resouces in cleaner ways than the counties we would otherwise be buying them from would be able to. …but I’m no economic expert either… just stating my thoughts on the issue.
(Welcome back by the way. Havn’t seen you around in quite some time.)
“Why do we go out of our way to spend money that we don’t have?”
Let me see if I can shed some light. Some people have the attitude of well hell, I’m in this far, what’s another couple thousand, or whatever when it comes to thier credit cards. Unfortunately, it’s exactly that, that’s killing them. However, school tuition is also more expensive and it’s a lot harder to get a loan nowadays As for the housing situation, Many people got variable loans and didn’t read the fine print. Variable loans are trouble with a capitol T. They DO and will change in an instant. Some people like to keep up with the jones’s as well ( who the hell are they anyway?); so they get the fanciest cars, the bigger houses, the finest clothes…and even thier pets eat off the fine crystal.
I had a co-worker who did NOTHING BUT spend money she didn’t have. She ALWAYS fielded bill collectors. She was ALWAYS late on her house payment. But she sure as hell could afford clothes! She never saved anything.
I wouldn’t say we go out of our way to spend what we don’t have, ( I don’t at least, but I have a house payment and an HOA fee) I would say that people just make extremely dumb choices.
There’s also the fact that most young people now have parents who bail thier butts out. With thier 401k’s b/c they have no other money.
I know I went a little of topic, but I hope this helps. AND good for you about the house thing! You iz smart grrrrlllll!
AND welcome back!
I don’t know that you want an in-depth economics lesson as a Xanga comment, but let me try to briefly respond to some of the questions you raised.
Looking at a tax cut on an individual basis doesn’t demonstrate its effectiveness. Imagine building a subway at a cost of $1 million. When the first passenger rides it, you just spent $1 million to give one person a lift uptown. That seems like wasted money. It’s only over time, as millions ride the subway, that the per-person cost of a train ride falls into a more affordable pennies per rider realm.
Look at the tax cuts as a whole: The nation’s economy suddenly has $75 million injected into it. Money that would have been misused by a bloated, corrupt bureaucracy (our government), instead goes directly to individuals, who make needed purchases. But it doesn’t stop there. The $75 million, once spent, is now in the hands of the people who sold the goods. Now they spend it. Each time it is spent, some makes its way back into the government’s coffers due to sales taxes and so forth, but you can see that the $75 million tax cuts eventually translates into perhaps $200-300 million in spending.
Where Obama seems to be getting into trouble is that he is simultaneously increasing government spending. Perhaps a far more effective plan would be to cut taxes, and at the same time, reduce government spending. I could spend pages on this topic, so I’ll stop here. I hope this was at least somewhat informative.
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