Economic Stimulus Package

[toasty]

Looks like those of us in the US are poised to get another tax rebate check, was curious what people thought about it. I'll be honest, I think receiving a check for $1600 is great, and it will certainly be put to good use. I'm not sure that I agree that it's the best way to prevent an impending recession, though.

For me, we've got some work around the house we were needing to do, and that extra cash will help offset that, which is nice. For the people that are really struggling, though, does this really get at the heart of the problem? Maybe it gets bill collectors off their backs for a few months, but what happens after that? Seems like a Band-Aid, sorta the difference between giving a man a fish and teaching him how to fish. That said, I don't know that spending money on bloated government programs designed to spur the economy is the answer, either. Maybe the creation of government jobs that address another specific need, like infrastructure, would be the best answer? I dunno, I really don't.

Don't get me wrong, I'm all for tax breaks. Just wondering if this is actually likely to stimulate the economy in a meaningful way. Anyone with some economic expertise care to chime in on this?

[Jenks]

Re: Economic Stimulus Package

i wonder where they're going to get the money for this.

it's also real nice to give people money right around election time.

that said, i'll take whatever money uncle sam wants to give me, right or wrong.

[Miroslav]

Re: Economic Stimulus Package

I'm no economic expert, but as I understand it, the goal of such fiscal stimulus is to stimulate aggregate consumption/demand. The theory is that everyone who gets the "free" cash will spend some portion of it...and the party on the other side of the business deal will spend some portion of what they get...and so on. Thus, there is a multiplier effect at play in these things where the final result of the stimulus should theoretically be much greater than the original face value given.

My question is: what if people who get the cash, scared by the impending recession, will save a heck of a lot more of it and spend a lot less?

Also, fiscal stimulus is not going to fundamentally address all of the bad loans that banks have on their books and the resulting credit crunch from that. Those banks are still in the process of writing down their assets; many have probably not even fully figured out just what their final risk exposure is and they won't know for some time...

My guess is that this fiscal stimulus will not stop a recession from occurring, and that the recession will be deep this time. We're probably already in one anyways.

[Shpira]

Re: Economic Stimulus Package

well, in the UK they are announcing cuts in the interest rates...(in the UK the interest rate lvl is set by the bank of england)
This is a good way of attempting to prevent a recession and stimulate growth.

You're right about the tax break and the multiplier effect - it is too little too late in my opinion. The US economy at this stage requires the government to boost it with money from the national treasury. However this unlikely to happen as most of the national money was spent on weapons and "re-building" Iraq instead of re-building the US.

[Miroslav]

Re: Economic Stimulus Package

well, in the UK they are announcing cuts in the interest rates...(in the UK the interest rate lvl is set by the bank of england)
This is a good way of attempting to prevent a recession and stimulate growth.

You're right about the tax break and the multiplier effect - it is too little too late in my opinion. The US economy at this stage requires the government to boost it with money from the national treasury. However this unlikely to happen as most of the national money was spent on weapons and "re-building" Iraq instead of re-building the US.

Maybe you missed that the US Federal Open Market Committee just did the biggest one-time rate cut in 20 years. That move effectively puts more money out into the US economy, since it ultimately makes it easier for various economic constituents to borrow.

Also keep in mind that it's not like the US government has a finite money supply and they have to decide to spend it in Iraq or over here...they control the money supply and, if they chose, they could print as much money as they want and hand big wads of it out on all the street corners (although that would be stupid)...

[Shpira]

Re: Economic Stimulus Package

Yeah but printing money would just create a bigger problem...i dont know what the answer is. Apparently George Soros outlined what needs to be done by the US govt and said that if radical steps are not taken a crash of the magnitude of that in 29 can be expected...

I mean he might be talking bullshit...haven't had the time to read the interview...friend told me about it.

[superdave]

Re: Economic Stimulus Package

There's some debate on who gets the rebate, how much and for some is it really a payment. I know Bush wanted to give a true rebate meaning that you only get money back if you paid a certain amount of taxes in. The Democrats want to do that, but take it a step further and give money to lower income people who pay little or no taxes. Personally, I think the Bush plan makes more sense as I think taxes are too high any way.

The government needs to get the rebate plan going soon as this seems a short term fix and would be a psychological boost to consumer confidence. The rate cuts the Fed did I think would take more time and may take longer to effect the economy.

I don't believe the 1929 hype. Back then, we didn't have many securities laws and the oversight that we do now.

[Kamal]

Re: Economic Stimulus Package

On CNN right now

To stimulate the U.S. economy, the government will offer tax rebate checks of $600 per individual and $1,200 per couple, sources said.

[Jenks]

Re: Economic Stimulus Package

There will never be another crash like '29. The market shuts itself down when it reaches a certain point. That's not to say we're not in for some deep fiscal shit, but a crash the magnitude of '29 aint happenin.

[Shpira]

Re: Economic Stimulus Package

we'll see...I'm not saying that there will be but I'm not saying that there won't either...
but i still think that 600$ per person is nothing!!!
thats like a cdj 200 per person....lol

[Miroslav]

Re: Economic Stimulus Package

^^ but don't forget the multiplier effect...that's really the only way these things can work.

And if 1929 were to happen again, then you (entire world) are all going down with us!!

[Shpira]

Re: Economic Stimulus Package

yeah but i have an atomic shelter with stockpiles of food, water and x rated dvd's in the basement.

[ddr]

Re: Economic Stimulus Package

the way recessions work is that they are studying 3-month old data... therefore if they say we are going to be in a recession, that is with 3-month old data... therefore we already are in a recession as it is 3-months later than the data they are studying... if that makes sense.

as per the $600.. if i get the check, i will prolly spend half of it and the rest will go towards my CC lol

[Kamal]

Re: Economic Stimulus Package

I want to spend all of it towards my 60" TV

[Yao]

Re: Economic Stimulus Package

lol. Kamal is going to prevent this recession single-handedl if he can help it