Tax Rebate Smackdown
From today's LA Times:
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.