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Twenty Lousy Bucks?!?!?!?!

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February 10, 2009 – Comments (22) | RELATED TICKERS: TR

I've posted a million times about how I think that the stimulus package is a poorly constructed pork-laden piece of junk, but one statistic from President Obama's press conference last night completely sealed the deal for me. 

Let me begin with the disclaimer that Obama came across as a very articulate, intelligent person who had a good understanding of many aspects of the current crisis that we find ourselves in.  The contrast between him and the former president is night and day.  It's like comparing someone with a PhD to a fifth grader.  Having said this, actions speak louder than words and I have been fairly unimpressed with Obama's ability to get anything done in his first few weeks in office.

Anyhow, back to the point of this post.  Studies have shown that one time tax credits are much less likely to be spent by consumers than permanent tax cuts.  One needn't look any further than the dumb tax rebate checks that Uncle Sam mailed out last year to see that they don't work.  Yet, here we are again doing almost the exact same thing, giving individuals a $500 payroll tax credit to try to jumpstart the economy.

Do you know what a $500 payroll tax credit comes out to per paycheck...wait for it...$20.  That's right, the value of most Americans' retirement savings has been chopped in half and they've lost tens of thousands of dollars in equity in their homes and the government is going to make everything better by chucking them TWENTY LOUSY BUCKS?!?!?!  That's only ten freaking bucks per week.  What on Earth do they think that this is going to stimulate?  Sales at Tootsie Roll Industries (TR)? What in the heck can you even buy for ten bucks, a pack of gum? 

You can talk until you're blue in the face about the law of large numbers and how $20 spread out amongst millions of people will have a huge impact, but I'm not buying it.  People are going to take this $20 and stick it in the bank, the economy will still stink, and then this and future generations of taxpayers will be stuck with the bill.

Deej

22 Comments – Post Your Own

#1) On February 10, 2009 at 6:10 AM, DaretothREdux (39.76) wrote:

Since it was my twenty lousy bucks in the first place...

I would personally rather have it back, so I can choose what to do with it.

Taxes are simply a question of the right to one's own property, and without the right to property there can be no such thing as a functioning economy.

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#2) On February 10, 2009 at 7:11 AM, tfirst (30.54) wrote:

Let me get this straight....I rent the real estate I own from the government, as a right to own it, so they can maintain a functioning economy? We are so screwed.

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#3) On February 10, 2009 at 7:30 AM, truthisntstupid (82.61) wrote:

Well I can pretty much guarantee it'll help me to increase the amount I'm able to save each week.  But.....I am single and no longer have the expense of raising three children.  At MY end of the income spectrum there is, for many of us that DO have kids, no such thing as extra money.  It does get spent.  Be glad you make enough money to think it doesn't. 

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#4) On February 10, 2009 at 8:04 AM, TMFDeej (99.43) wrote:

Truthisn'tstupid, you're turning a discussion that's purely economic into a social one.  Economically speaking, giving $10/week to people who have seen tens of thousands of dollars in wealth evaproate over the past year and expecting it to turn the economy around is the equivalent of trying to take down an elephant with a pea shooter.

In your message you said "Be glad you make enough money to think it doesn't."  You don't know me, so don't judge me.  Money does matter to me.  I am a father of two who works two jobs (three if you could the writing that I do for TMF) and a wife who works full-time.  We live within our means

We don't go out to dinner every night.  We don't go on fancy vacations.  We don't drive fancy cars.  We buy clothes that are on sale.  We don't have a fancy 50 inch LCD TV.  We by every day items in bulk at CostCo. 

Why should others who partied like it was 1999 and spent more than they should be bailed out at others' expense?  I digress.  Sure there are a lot of nice people out there who will be helped by a few extra pennies a day, but that was not the point of my post. 

The point was that this package will not be effective in stimulating economic activity like it is intended to do and our politicians are trying to convince us that it will.

Deej

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#5) On February 10, 2009 at 8:33 AM, truthisntstupid (82.61) wrote:

I'm sorry for the false assumption. I make $9/hour and live well within my means.  And where I live that's good money for what I do. So....the economic discussion, then.  I would like to know if the economic arguements and assumptions people who support tax cuts for upper-income wage-earners have any facts to back them up.  What percentage of the money they get to keep, do you think, actually gets spent creating jobs?  After all that's the arguement, isn't it?  And how much of it do they just invest in  jumbo CDs, playing the market, and buying rental property?  I bet that last one will sure explode in the next year or two.  In other words how much of it actually goes to create jobs rather than just being invested to make them richer?  Mind you I have nothing against rich people but give the tax cuts to the people at the other end and they're more likely to spend it.  For those who are so sure that people on easy street will start up businesses and create jobs or spend it, why wouldn't a tax cut in the form of a tax CREDIT rewarding job creation be better than some assumption that may or may not be true depending on what they do with the money.  Otherwise I believe said tax cuts are regressive, will have minimal effects compared to giving them to lower-and-middle income people, and do nothing to close the ever growing gap between rich and poor. This can only go on for so long before someday we have a "proletariat uprising".  If enough people are someday getting squeezed we will not be immune.

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#6) On February 10, 2009 at 8:34 AM, BGriffinFlorida (26.42) wrote:

Deej,

What do you propose?

It has been a fairly safe bet to criticize any proposed or attempted course of action.  What has not been safe is to propose something viable.

 Ben

p.s.  9 or 10 years ago, I would have told you that it was unthinking and callous to use the term 'articulate' to describe a well educated man, especially a well educated black man.  As Chris Rock notes, 'articulate' is something you say about a Boxer, not the President.  Sadly, the past 8 years have broken more than the economy.

If i ever again hear someone in earnest say something similar to "You don't have to be able to speak well,  to be smart,  or be a good President', I doubt I will be able to restain myself from giving them at least a black eye and also releaving them of the burden of multiple teeth so that they can be free to speak poorly enough to qualify as smart.

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#7) On February 10, 2009 at 8:38 AM, Varchild2008 (83.67) wrote:

$20 bucks is going to people who do not even pay any income taxes.  This isn't a tax cut.  People have to realize that.  This is not "Conservative" ideology stuff by any stretch of the imagination.  It is a "This is my money" type situation.

Tax Credits never work.  If they did then our economy would always be sky high due to all of the Welfare Checks we hand out to people. 

I hate how so many people can get confused with "Smaller Government" principles and Tax Credits as if they are the same.

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#8) On February 10, 2009 at 8:42 AM, Varchild2008 (83.67) wrote:

"What percentage of the money they get to keep, do you think, actually gets spent creating jobs? "

Well, it's also about stemming the job losses.   Having a 38% Tax Rate on Corporate Buisnesses has lead to outsourcing more than any other political action.

Lower tax rates for Businesses..I.E. "The Rich" and you create jobs.  It's what happened every single time it was tried.. J. F. K. did it. Ronald Reagon did it.  President Bush 1st Term did it.

And it worked.  It always works!

What NEVER works is raising taxes on the rich and losing jobs or keeping tax rates near 40% and losing jobs to outsourcing and businesses like Haliburton jumping ship to Dubai.

In fact a Health Care stock left America in 2008 because of the sky high tax rate.  This is common sense logic here that liberals refuse to admit is actual 100% verifiable fact.  That health care play's name starts with the letter C but I don't know it.  They took their Headquarters and moved to IRELAND for the cheaper tax rate.

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#9) On February 10, 2009 at 8:49 AM, truthisntstupid (82.61) wrote:

"Tax credits never work?"  Take them all away and see what happens. Then we'll know. I don't care.  I may not make much money but by saving and investing (and working hard)  I've raised myself a little ways up from the "freeloader" status you describing.  But if you think millions of people having much less to spend won't affect YOUR job security, well - maybe you're right.  But the difference may be more than you think.

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#10) On February 10, 2009 at 9:01 AM, clevebob1 (< 20) wrote:

While I agree with both the assessment of the the $20 motif as useless and that the former CIC is a Texas sized fifth grader, you're missing one element in your argument.

 Patience.  When you couch assumptions with a sentence that contains..."I have been fairly unimpressed with Obama's ability to get anything done in his first few weeks in office".

 First few weeks?!  This kind of short term reactionary approach is what got us here in the first place.  Cool out, mon fool. We've got a long way to go.  Stay focused and stick in the game for a little longer please...

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#11) On February 10, 2009 at 9:03 AM, Gemini846 (50.04) wrote:

Kind of like the 6 buddies drinking beer and splitting the cost right?

I love you all dearly but I've had to cut down on my blog reading at work because the state of affairs in our once great country makes me want to vomit, especially when I see liberal senators who have no idea what they are talking about spouting the party line to ensure thier wellness with the new administration.

No Mr President your sh.. dont stink.

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#12) On February 10, 2009 at 9:03 AM, truthisntstupid (82.61) wrote:

Agreed about the corporate tax rate.  I certainly won't argue with that.  As far as the job losses...I believe people in other countries are less inclined to pay more for american-made products than americans are, and - no surprise - americans, for the most part, aren't inclined to do so either.  I certainly won't.  I will get the best deal for my money and if some union folks making three times what I do don't like it that's just too bad.  I believe unions have hurt this country in the last few decades. I have little sympathy for people making $30/hour with full medical/dental and a pension plan.  Very few people around here have that.

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#13) On February 10, 2009 at 9:39 AM, OneLegged (< 20) wrote:

The corporate tax rate is regurgitated ad naseum (pun intended), but how many companies actually pay the 38% quoted here or the 45% I read elsewhere?  Very very few, if any.  Not a real basis for discussion.

 With pensions nearly nonexistent.  Pay rates decreasing when adjusted for inflation.  401K matching programs being reduced or eliminated.  How about really helping out businesses and taking it to it's logical(?) conclusion?  I would propose the following to really prop up the economy and get American businesses to maximum profitability:  A federal maximun wage of $12 per hour.  Make employer-offered retirement money of all types illegal.  Make it illegal for companies to offer benefits of any kind to employees.  No more sick pay.  No more paid leave of any kind.  No more organized loabor.  etc. etc. etc.  The playing field would be leveled.  Businesses would profit.  Angels would sing.

 This would instantly send the economy to dizzying heights. Wouldn't it be grand?  How can employees be so bold as to expect to actually make a living by going to work? 

The few American workers who actually make something tangible can often not afford to buy what it is that they are producing.  Just like living on credit, this is not sustainable in the long run.

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#14) On February 10, 2009 at 9:42 AM, TMFDeej (99.43) wrote:

The definition is insanity is doing the same thing repeatedly and expecting a different result.  We've already tried the one-time stimulus payments numerous times in the past, the latest one as recently as just last year.  They do very little to stimulate economic growth.

When consumer confidence is low, and it is in record low territory right now, people rightfully scrimp and save every penny that they can.  They don't spend one time payments.  They didn't in 2008 and they won't this time.

If you really want to stimulate the economy give people permanent tax cuts

OR

spend all of the stimulus money on ready to go non-pork infrastructure projects, not ones that are several years out

OR

spend money to drive mortgage rates down to 4% which would give everyone who owns a home a permanent several hundred dollar per month "stimulus." 

I guarantee you that much more money would get pumped back into the economy by people saving several hundred dollars per month, every single month for the next several decades than from people getting an extra $20 in they paycheck for the next year.  Low mortgage rates would also serve to artifically slow the rapid decline in housing prices.

I'm against intervention in the markets to that extent, but if you're going to do something...at least do it right.

Deej

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#15) On February 10, 2009 at 9:53 AM, Gemini846 (50.04) wrote:

$12/hr for some kid who is standing behind the counter at McD's txting his girlfriend at the icecream shop?  

Are you nutts?  I participated in a local discussion on minimum wages when I was younger and studied labor history in college. Minimum wages are a scourge on industry.

They are devastating to smaller business, and they are very damaging to people who make just above the minimum. If I'm making $15 an hour and the minimum wage goes from $7 to $12 there is no guarantee that my wage is going to $20. I just got squeezed. Not only that you want to take my healthcare, my 401k, my profit sharing plan, my paid vacation? Don't forget if the business is paying you $12 they are really paying $18 for you thanks to taxes. The best solution we came up with to maintain families above the poverty line was a tax credit to employeers for hiring head of household type earners. They would be more willing to hire Joe/Jane stable adult at $12 an hour than Max partykid at $8 and pay $4 in taxes on him.

People need to realize that the government is not providing the services people want at a good price the way the private sector could. Stop trying to regulate.

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#16) On February 10, 2009 at 10:03 AM, OneLegged (< 20) wrote:

$12 MAXIMUM wage.  You didn't read my post. 

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#17) On February 10, 2009 at 10:04 AM, tomjones42 (< 20) wrote:

Gemini, I think you misread, he said maximum of $12/hour.

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#18) On February 10, 2009 at 11:25 AM, saunafool (98.63) wrote:

The tax cut is in there because the Republicans said they wouldn't support the stimulus package if it didn't include tax cuts.

Problem is that pushing money into the system right now is pushing on a string. First, putting the money out there doesn't mean it will get spent. In recent decades, putting more money out there had a multiplier effect due to easier and easier credit. Now, that multiplier effect has disappeared.

In other words, giving $500,000 loans and home equity withdrawals to everyone without verification of income really stimulated the economy during the past 6 years.

That isn't going to happen anymore and no tax cut of any kind will reverse the deflationary pressure of a rapidly deflating credit bubble.

Therefore, the stimulus package spends heavily on infrastructure and other government jobs. Guys like Dare hate the expansion of government, but the private sector is going to keep deflating and the government is really the employer of last resort in this situation.

Finally, no one could write a $830 billion spending proposal without drawing a ton of criticism. Personally, I think most of the spending in the bill will have its desired effect, and I think they should pass it and get moving.

Therefore, let Obama and the Democrats take ownership of the recovery. If it works, they stay in power; if it truly is waste and pork like the Republicans say, well, they'll get their shot soon enough.

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#19) On February 10, 2009 at 12:40 PM, DarkToast (48.09) wrote:

I would be more upset about an extra $20 a paycheck if it represented the entire plan. I have read that they plan to accelerate the first years payment and give it as a lump sum. This is still a pretty meager $500 or so. To me it indicates a step in the right direction.

If tax cuts at the upper income brackets are stimulative, then they should be in the middle brackets as well. After 8 years of increasing tax burdens to the middle class, while the rich and poor both had their burdens reduced, it is time for the bulk of Americans to get some relief from taxes.

Even if this money is completely wasted, it is much cheaper and will have much more of an effect than the billions that have been given to the finance industry to subsidize their bonuses.

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#20) On February 10, 2009 at 5:10 PM, eekthecat (52.42) wrote:

$10 for a pack of gum? That better be some amazing gum.

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#21) On February 10, 2009 at 7:56 PM, AnomaLee (28.53) wrote:

Because the Federal Government operates like a Dow 30 company where quarterly results are more important than long-term planning beyond the next election.

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#22) On February 14, 2009 at 10:02 AM, fransgeraedts (99.91) wrote:

1. Yes, taxcuts and subsidies for people are not going to get the economy growing because people are reducing debt  -and rightly so.

2. For the same reason lowering interest rates is going to have not as much effect as you would like -because people are reducing debt  -and rightly so.

3. Because of this consumer-strike a large part of business is not going to invest. So stimulating private investment is not going to work either.

4. The only way to get the economy growing again is if the government invests on a large scale. That will trigger investment and create jobs.

5.That investment should be in "infrastructure". That is in collective goods that private capital will not invest in because the timehorizon is to large and the profitmargin to small ..but that are nevertheless vital for our future prosperity.

6. For example CO2 free energy, affordable housing, public transport, an intelligent grid, urban renewal.

7.  It should be financed by large scale borrowings. It would be ideal to create a special fund outside of the budget. Over time the profits from the public investment should be used to pay down the debt.

8. When the economy begins to grow again more of that growth should become available for wages, less for profit on investment. That is an economic necessity. The next expansion fase will not be led by investment but by consumption. Not debt based consumption but wage based consumption.

 

frans geraedts

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