Monday, January 28, 2008

Tax Rebate Smackdown

From today's LA Times:

Jason Furman:

In May, June and July the U.S. Treasury will likely mail out $100 billion worth of checks to working households. If past experience is any guide, at least $50 billion of these funds will be spent — which together with multiplier effects will add about 3% to the annualized growth rate in the third quarter of 2008. If food stamp increases or extended unemployment insurance are added to the final package, as demanded by many in the Senate, the macroeconomic benefits would be somewhat larger.We will eventually need to pay back this money, but an extra year of lower unemployment and higher output will put us in a better position to do so.

Steven E. Landsburg:

In sum, you (along with the president and the majority of Congress) are asking us to:
  • shower people with loans to encourage reckless spending;
  • somehow expect that the loan recipients will feel both richer and not richer at the same time (so that they'll spend more without working less), and;
  • do all this in the name of delaying the sometimes painful adjustments that are going to have to get made a year down the line in any event.

I object. The last time large numbers of people were showered with loan money and encouraged to live beyond their means, it was called the sub-prime crisis, which is what got us into this mess to begin with.

Note: All week in the LA Times, Jason Furman, an advisor to President Clinton, and author-economist Steven E. Landsburg discuss the U.S. economy and the recently announced stimulus package.

Standings So Far: Landsburg 1, Furman 0.


3 Comments:

At 1/28/2008 7:00 PM, Anonymous Anonymous said...

Lets mail the working stiff a one time $300 check, while we give $150K and a hall pass to the buyers and banks that got us into the mess.

Where's the beef? The pea is under the pod called the GSE loan limit increase from $417K to $729K.

The more stringent FNMA, FHLMC limits are raised for one year, while the less stringent FHA limits are raised, permanently.

According to California Sen. Barbara Boxer's office: On the average $650,000 jumbo loan balance, a 30-year fixed rate mortgage,

the lower rate (-1%) on the "conforming" GSE jumbo would result in an average $417 per month savings, every month for 30 years!

Thats a $150K subsidy which amounts to white collar welfare for rich homeowners and speculators.

 
At 1/28/2008 9:04 PM, Blogger juandos said...

"Lets mail the working stiff a one time $300 check, while we give $150K and a hall pass to the buyers and banks that got us into the mess"...

Hmmm, what planet is this happening on? Is it even in our galaxy?

Where's the disgust at people who floated a loan but couldn't pay it off?

Did someone hold a gun to the heads of these deadbeats and tell them they had to get a loan?

Curious minds want to know...

 
At 1/29/2008 9:53 AM, Anonymous AndresMR said...

I don't get it how "...food stamp increases or extended unemployment insurance are added to the final package... the macroeconomic benefits would be somewhat larger." So, are the benefits some kind of magic? But commen sense says if you're paid NOT to work (by extending unemployment benefits) you'll tend to work less. Ask the European about it.

 

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