Comments on: Economic Stimulus Package Has Not Been Finalized

By: Andy

Andy — Sun, 27 Jan 2008 15:29:38 +0000

This is nothing more than an election year incumbant vote buying scheme. The money is trivil to the overall state of the economy, but it will give these politicians lots of fodder in the upcoming election.

By: Adfecto

Adfecto — Sat, 26 Jan 2008 23:10:40 +0000

@ JSB -

You want to force people to spend the money, but that is not needed to help the economy in this case. If the government borrows money at low rates and then consumers save this money, it will provide banks and lending institutions capital to make loans. This will help ease the credit crunch and permit business to get access to credit. Everyone is happpy: the consumers, the lenders, and the businesses that received loans.

By: JSB

JSB — Sat, 26 Jan 2008 20:58:46 +0000

I’m not sure I can agree with Adfecto on this. I guess we’ll have to wait and see what affect the rebates will have on the economy. Most checks should be delivered (if the bill passes the Senate) by June – things could well fix themselves by then. I think a better idea would be for the government to issue coupons or vouchers with an expiration date. This would force people to spend the money – rather than save it.

By: Adfecto

Adfecto — Fri, 25 Jan 2008 22:09:19 +0000

At first when I read about this stimulus package based on rebates I was immediately skeptical and assume it would be a Bad Idea (TM). However, when I did the numbers it turns out that it isnâ€™t such a bad deal after all. This is because the US government is effectively borrowing money at a very low rate (approx. 4.36%) to return it to the economy which will almost certainly produce a higher return on the capital. Our government bonds still fetch below market interest rates and that is what makes this deal actually help the economy.

What this plan will not do is cause a long term improvement in the US economy. It will prop up spending for 1-2 quarters, which if we are in or will have a real recession (2+ quarters of GDP contraction) this wonâ€™t fix it. I am not a fan of running regular and prolonged budget deficits (governmental or personal) but utilizing our governments good credit rating to fuel money to cash strapped consumers is based on valid economic and finance theory.

This is a shameless plug, but Iâ€™ve written a more extensive look at this topic so if you are interested check out my blog.

By: Brian

Brian — Fri, 25 Jan 2008 21:52:57 +0000

Not sure if anybody has seen the “Futurama” episode where Nixon’s head distributes $300 in “Tricky Dick Funbucks” and hilarity ensues based on what people spend it on.

I’ll save the rant for later. But yes, this is a temporary band-aid that we’ll pay for plus interest in the future.

By: John

John — Fri, 25 Jan 2008 18:18:44 +0000

How is food stamps an economic stimulus? Are we going to be creating more farmers with the increase in food demand? Maybe need more grocery stores? That is just a welfare plan not an economic stimulus package. We need jobs to be created not just give more handouts to people.

By: ChristianPF

ChristianPF — Fri, 25 Jan 2008 18:07:50 +0000

@rawdaw
I agree, I understand the basic reason to get the checks into the hands of the spenders, but I feel like it is an oversimplified approach to a much more complex problem. And to be honest, it is inevitable. Recessions are just part of the normal cycle of things. Does our government really believe that we could have a Bull Market that never comes to an end?

By: rawdawgbuffalo

rawdawgbuffalo — Fri, 25 Jan 2008 16:47:04 +0000

All of this is just a short term fix. And truth be told, it has been happening over past 3 decades. Reagan and Clinton have just as much blame as the current administration. This is an interesting perspective on this(the midas touch)