Stimulating thoughts

Much has been made in the media lately about the so-called “Stimulus Package” that has been passed by both sides of the house. Checks will soon be winging their way to a bank account near you.

Otto von Bismarck once said, “There are two things that you should not see being made; laws and sausages“. Just like sausages that can only honestly be described as a “processed meat food product”, the name “Stimulus Package” is one that defies description.

It is technically defined as a “One-time Tax Credit” on our 2008 taxes. Eligibility is based on taxable income; the “rich” won’t get a check. At the other end of the spectrum are those who will get checks but will pay no taxes in 2008.

So… the rich pay in taxes but get no check, while the poor pay no taxes… and get a check anyway! To quote Timon, “Did I miss something?

Now we’ve dealt with the what, let’s move on to the why. Why are we being sent checks? Apparently the theory is that we will all run out and spend the money on luxury items and thus “stimulate” the economy.

Will the economy be “stimulated” by this extra money? I doubt it. Many will have spent the money before the check has arrived. Others will use it to pay off debts. Still others will save or invest the money. Some will “blow” the money, to be sure, but the impact on the economy will be minimal and short-lived. The phrase “Bandage on a gunshot wound” comes to mind.

What is most amusing about all this is the underlying assumption; that giving people back some of their taxes will stimulate the economy. If this is true, then it follows that abolishing income tax (and replacing it with a purchase tax like the Fair Tax) would result in an economic boom, “the likes of which the world has never seen”. I happen to agree.

The saddest aspect of this whole affair is what our economy has become. It has stopped being about making, building and selling things, and has become based on how much money we spend on crap we don’t need. That is what the economists mean when they say things like “Consumer Spending is down X% on this time last year“.

The last time something like this happened was a few years ago (wasn’t that an election year? Naah… must be a coincidence). Back then it was called a “tax refund”, and some people did not get one.

I remember having to explain to a relative that the reason that she did not receive a tax refund because she had not paid any Federal Taxes. She was not pleased, which I can well understand; however, the principle is easy enough to figure out: A tax refund given to one who did not pay tax is also known as a bribe.

Enjoy!

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