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alstry (35.49)

Who is giving our president advice?

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April 07, 2008 – Comments (4)

WASHINGTON (MarketWatch) -- The recently enacted fiscal stimulus package will add 1.5% to the economy, President Bush said Monday. The stimulus package should be given a chance "to kick in," Bush said at a meeting with business leaders. He also acknowledged consumers are still hurting, citing worry about the cost of fuel in particular.

http://www.marketwatch.com/news/story/bush-says-stimulus-package-add/story.aspx?guid=%7B854E6259%2DBA84%2D4EAB%2DA323%2DEDF3F7345287%7D&dist=hplatest

Let's say the economy is about $12 Trillion and the $160 Billion dollar package is about 1.5% of the economy.....if every dime of it is spent.

The problem is that surveys have shown that much of the rebates will go to paydown debt.  Paying down debt adds little if any stimulous to the economy.  Until we figure out a way to materially cut costs or increase income, paying off $600 of debt will likely have very little stimulous effect.

Reality and projections are seemingly getting further and further apart lately.

4 Comments – Post Your Own

#1) On April 07, 2008 at 3:27 PM, alstry (35.49) wrote:

WASHINGTON (MarketWatch) -- U.S. consumers once again took on more credit card debt in February, pushing up total seasonally adjusted consumer debt for the month. Total consumer credit increased by $5.2 billion, or a 2.4% annual rate, to $2.54 trillion, the Federal Reserve reported Monday. Of the total increase, credit card debt rose by 6% and accounted for $4.7 billion. Nonrevolving credit like student and auto loans climbed by 0.4%, or $496 million, the Fed said.

 

The tax rebate barely makes a dent in the $2.54 trillion of consumer credit.  Now people are borrowing on credit cards to buy food and gas.....and that is after failing to make mortgage payments.  Many people seemingly can't make ends meet even if they lived in their house for free.

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#2) On April 07, 2008 at 4:14 PM, mandrake66 (95.08) wrote:

Also, the rebates only go to people who pay taxes, therefore, people with income. Many of the rebates will go to people for whom the amount is likely too small to affect their spending decisions; that is, it is negligible for them. Others will, as you suggest, pay down debt.

The best way to get the money actually spent would be to give it to low- or no-income people, who will spend it almost immediately on necessities. But that is "politically unrealistic".

Furthermore, if people who do spend the rebate do so on imported goods, whose economy will end up being stimulated? China's? 

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#3) On April 07, 2008 at 4:34 PM, Imperial1964 (97.88) wrote:

Well, the government could do as it did in the '30's and spend the money on infrastructure.  That would probably be the smart thing,  creating jobs and building for the future, rather than giving it to people and telling them to blow it on stuff like bigscreen TVs that are made in foreign countries anyway.

Personally, I'd rather the government just give me back some of my tax dollars and waste less (e.g. unprovoked foreign wars, etc.).  But instead they're borrowing the money.

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#4) On April 07, 2008 at 5:27 PM, StKitt (31.83) wrote:

This is how great empires fall.

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