A Few Unorthodox Suggestions for Spending Your Stimulus Package
I am still trying to wrap my head around the wisdom behind the seemingly inevitable economic stimulus package. The administration and many leaders in Congress are proposing a combination of tax cuts and rebates to the tune of $150 billion dollars!?! Oh, so there’s a tax surplus in Washington of $150,000,000,000? I knew I was paying too much in taxes! Wait…what about the $9 trillion dollar national debt? Can the government really afford this even if it does hope to get some of the money back? 1 Well, I am sure that the U.S. Treasury will take care of things just like they always do — by simply printing more money. Who cares about inflation when it feels good, right? Our cultural values are all about instant gratification and $1,600 per family or $800 for individuals will buy a lot of big screen televisions; thus 1) averting the impending entertainment drought caused by millions of analog TV’s being rendered useless by the FCC mandate that broadcasters go fully digital in 2009, and 2) propping up the profits of overseas electronics manufacturers (buy stock in LG, Samsung, Sony, and Vizio now). Remember, we have a global economy, so think of the stimulus package as being for the Chinese factory worker as much as it is for the average American.
However, if you already have a shiny new HDTV hanging on the wall or simply must have one before the Superbowl, then below are some suggestions for other things you can do with your stimulus package (when it finally arrives):
- Pay off your debt (Americans carry nearly $10,000 in credit card debt)
- Put it in savings (Americans save -0.5% of their disposable income)
- Give it back (annual interest on national debt is over $2,755 per taxpayer 2)
Of course, keep in mind that improving your personal long term financial outlook goes against the government’s plan, which revolves around the so called “multiplier effect.” This is the economic theory “that an initial spending rise can lead to even greater increase in national income.” In other words, by dangling a carrot the government 3 hopes that its citizens will take a bite and continue to mirror its own irresponsible spending habits. No wonder we have such a hard time saying “no” to ourselves.
1 If I recall correctly, the $200/$400 Technically speaking the $300/$500/$600 tax rebates of 2001 were deducted from any tax refunds that appeared on returns filed in the next year for the 2001 tax year (though they were generated by temporary tax cuts). One would assume that the proposed stimulus package of 2008 will work the same.
2 $405 billion divided by an estimated 147 million wage earners.
3 Rather than spending your rebate you could instead donate it to the campaign of the only major party candidate running for president who supports sound long-term economic policies (just don’t tell him where you got the money).
Maybe instead of cash the government could give out frequent flier miles or Bilo bonus points? That way they could control where we spent our money…
Don’t stop at just our national debt! There’s also all the money we’ve sunk into Bush’s stupid war, which has been fought off the books. Our kids will be getting the bill for that one eventually…
@stelmodad: yeah, maybe even make the vouchers good for “American Made” products, only.
BTW, not sure if you’ve seen this at StElmo Pres, but our deacons have issued the BiLo cards before only to have them sold for cash.
@alice: wouldn’t be surprised if a good chunk of the increase in the deficit is due to the cost of the war…though I think we’re going to see some other “balloon payments” becoming due in the next 20-30 years.
Don’t forget, Bush and Bernanke specifically said to spend it, not pay off debt! That’s ok, ’cause I’m going to go right out and spend mine … on some gold or silver bullion, so it’s safe just in case they make a mess of the USD via inflation.
Donating it to Ron Paul as you suggest in footnote 3 wouldn’t be a bad idea either. He certainly can’t do a worse job spending it than the government right now …
@Jeremy: I’ve also heard “buy guns” floated by some. BTW, don’t you think it’s interesting that Paul is one of the few GOP candidates who is not in serious money trouble right now (excepting Romney of course)?
ugh, spend spend spend. so depressing. ours will go straight to savings and/or debt payoff.
can some one explain me your first footnote? if I get the $1600 this summer, I’ll get less of a refund next year?
If i default on my visa bill I won’t have to worry about going to jail… what happens if I don’t pay my share of the national debt?
Bob: Don’t forget.. you will have to pay taxes on that $1600..
@bobw: Yes, the 2001 rebate was an advance payment of 2001 tax refunds, but in hindsight I think the way I worded it in the post is misleading. The footnote is technically correct (except for the dollar amounts), but still subject to misinterpretation. Tax rebates are in conjunction with tax cuts, so it’s not like they’re giving away money that they already owed you — at least not until after the tax cuts were put into place. Let me explain…
The credit in 2001 was a result of a new 10% tax bracket that Congress created. For practical 2001 tax-filing purposes, it didn’t exist (research the 2001 tax brackets and income amounts they cover). Instead, the rebate came from the difference between the new tax rate of 10% applicable to income up to $6,000 for a single taxpayer, $10,000 for head of household and $12,000 for a married couple — versus the old tax rate of 15% that applied to those income amounts.
For example, 5% (the difference between the 15% and 10% tax brackets) of $6,000 is $300, which is the tax rebate you received if you were single, and had taxable income of at least $6,000 in 2000.
For those who remember back to 2002, where that little checkbox ([x] “Did you receive a tax rebate…”) came into play is that you calculated your tax on your return in the next year without the lower tax bracket if you checked “yes” that you received the full rebate in 2001. Those who didn’t get the rebate (or full amount), depending on their filing situation, could have gotten some of it back when they filed their 2001 returns.
In other words, the 2008 rebate will presumably be generated by tax rate cuts and is being pre-refunded to you in 2008, rather than you having to wait to file your 2008 tax return and receive the money sometime in 2009. And as much as I hate paying taxes (and in addition to the “multiplier” theory being IMHO bad economics), I still have a problem with the government cutting taxes without reducing spending. And as a temporary tax cut it’s essentially a form of welfare for the middle class. I think it’s also safe to assume that borrowing will be required to pay for the rebates.
Invest in something really tangible – like having a star named after you, or going to Dave and Busters.
I have a feeling that I’m going to use my Community Chest money on diapers. Now thats something tangible!
Sounds like a good plan to me…those diapers will stink you out of house and home!
Saw this on MSNBC…
10 Tips: What to do with tax rebate? Fund your own ‘economic stimulus’
This just in (details have been finalized)…
@stelmodad: I wonder if your newborn counts in terms of the “$300 per child,” or is it based solely on who you claimed as a dependent on last year’s tax return?
Check this out.
RON PAUL has a genuine and sustainable economic revitalization plan as an alternative to the present short-sighted attempt at central management.
“Real economic reform must address the underlying reasons for the current economic malaise,” said Ron Paul. “[My] plan is more than just a band-aid for our economy; it fundamentally reforms four areas where government policies are damaging our national economy. When enacted, my plan will provide both short-term stimulus, and lay the groundwork for long-term prosperity.”
Congressman Paul has written or co-sponsored numerous bills to enact the policies in his plan. Support his candidacy today.
https://www.ronpaul2008.com/donate/
More from RON PAUL on this issue in video:
http://www.youtube.com/watch?v=vKi8SSkyI2o
Where is the Federal government getting this supposed rebate?!
Ron Paul says: “Where’s the money coming from? We don’t have any money over here in Washington, we’ve consumed everything we’ve gotten. So, we either have to borrow it from China [or someone else] or we print the money, which is inflationary… even the “stimulus” by the Federal Reserve drastically lowering interest rates –this is a bit of a fiction too because the problem comes from artificially lowered interest rates… we can’t solve the problem of a weak dollar by printing more dollars”
Can’t argue with reality.
-.5%….wow.