Professor Mark J. Perry's Blog for Economics and Finance
Posted 11:43 PM Post Link
D'uh. This is what you get when you have the government mailing "stimulus" checks out. Does anyone really believe this Keynsian style "growth" is a positive thing? If so, then let's make these stimulus checks bi-annual. Actually, screw it, let's make them monthly!Let's see how well GDP does in a quarter when the government isn't debasing the dollar in a desperate attempt to force people to spend.
Linked.Anon, if you go read the Ben Stein article the good professor linked to in an earlier post, you can deduce that the stimulus checks were simply a politicians' trick. The scale of the economy is such that the stimulus checks were little more than a tiny ripple in a vast pool.Those checks were not sent out to stimulate the economy, they were sent out to make you think the government was doing something.
Hey Anonymous @ 3:56, you've got it. If a one time tax rebate is a good thing, why not just make lower taxes permanent (maybe cut spending too)?
The scale of the economy is such that the stimulus checks were little more than a tiny ripple in a vast poolThe $100 billion of stimulus cheques is $400 billion annualized. That's about 3% of annual GDP and 4% of annual personal income. That's more than a tiny ripple. Are we back to bensteinery's already? LOL
ditto anon 3:56 "D'uh. This is what you get when you have the government mailing "stimulus" checks out."
From here:The Senate and the House have both passed a stimulus package designed to give taxpayers rebates totaling almost $170 billion. The government’s hope is that taxpayers will go out and spend this money to spur along the economy.How much will I get? Depending on your income level, you may see up to $600 per person, with an additional $300 for each eligible child younger than 17. The rebate starts out at $300 per person, but rises to $600 per person to match the taxes you will pay based on your 2007 Adjusted Gross Income (AGI).Your AGI is generally lower than your salary, and is based on your earnings after tax deductions such as 401(k) and Traditional IRA investments and other qualified deductions. However, if you earn above a set limit, you may receive less than $600. The tax rebate decreases by $50 for every $1,000 earned above $75,000.What about dependents? If you are a dependent for someone else’s taxes, you will not receive a rebate even if you earned enough money to qualify for the rebate. If you are over 17 and are a dependent, neither you or your parents will receive a rebate. However, if no one can claim you as a dependent in 2008, you may still receive the rebate in 2009.This tax rebate actually is a rebate against your 2008 taxes, even though they have not yet been filed. Even though this rebate is actually for your 2008 taxes, it will be based upon your 2007 AGI. When you file your 2008 taxes in early 2009, the calculation will be run again. If you should have received a larger rebate, the treasury will send you another check to make up the difference. This would apply to people who had children during 2008, or those whose 2007 AGI was above $75,000, but dropped below that level in 2008. If you income rises and you would have received a lower rebate, you get to keep the difference. At least they won’t ask for a refund! In either case, you do not have to pay back any of this rebate.So:1) This isn't a complete giveaway, it's actually just assuming you overpay your taxes each year, and/or that your income will go up. Essentially, it reduces the amount of your tax return NEXT year.2) The only people who get "something for nothing" is the ones at the lower end of the economy. So it's basically another income redistribution scheme, just more subtle at it.3) As a result of "1", its effect on "debasing the dollar" is far less than suggested by anon 3:56. You're not adding to the string -- mostly, you're cutting it off one end and tying it onto the other.
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Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.
Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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