Logos of the Bogus

Spend Your Way to Prosperity

Posted by Bernard Hall on Feb. 3, 2008

There seems to be a confluence of ideas that are not adding up when it comes to evaluating the economic stimulus package coming out of Washington.  It seems that we are in a recession already.  Although the very definition of a recession would not be available for at least five months.  We would need two quarters of negative growth in the GDP.  However economists evaluating the economic situation have concluded that we wouldn't be going into a recession because of too much credit, overspending, and general poor money management. We're headed to recession for a different reason.

However the solution seems just as equivocal as the intricacy. How can hasty spending be a cure whereas imprudent expendature is awry? Let's look at couple things. It's being called a tax rebate. However, citizens that have owed no taxes in the past, are getting a rebate. Confusing to those with a dictionary at hand. This is being handled like a redistrubution of income. The rich people who make more than $75,000 pay the taxes and get no rebate, yet if you pay nothing, you get the $1200. Let's give money to those who cannot manage money because we know they will spend it right away. Hopefully no one will put it toward reducing their credit card debt. If overspending is done after the rebate is gone, they can go to the title loan store. Aren't they here to help too?

Then there is the little detail of taking five months to get the checks in the mail. In five months, things could be turned around. If relief is needed now, give it now. How about doing something like suspending withholding up to the amount of the rebate? Only that would not include illegal immigrants or the unemployed.

We are relying on some sort of warped Keynesian philosphy. We are having the government spend the money to get us out of recession out of fear a recession is coming. However, we are not looking at the money supply to keep inflation from coming back. Even the scholars of Econ 101 would recognize that recessions are in the regular economic cycles. I would expect to hear this from the same folks who say the gas price is so high because of supply and demand. However, we have to keep inflation down. Lower inflation would help the poor by not eroding buying power and raising the minimum wage would not have to be done three times this year to keep working families earning the living wage to send their kids to college on. Recesions are temporary. Inflationary effects are forever.