Last week President Bush proposed a $145 billion to $150 billion tax rebate for American families and businesses to provide “a shot in the arm” to keep our economy healthy and to avoid sliding into, what the media has been reporting as, a possible recession.
Of course the president never used the word “recession,” in his description of the current state of the economy — that would be admitting there’s a problem — just like he never uses the words “Oops. Me bad.” or “No Dick that would be illegal.” or “Fooled you once, shame on you. Fooled you twice, let’s invade Iraq.” or “Mission accomplished.”
The rebate figures I read in the press for American taxpayers could amount to as high as $800 for individuals and $1,600 for households. Is this a great country, or what? Look out Wal-Mart here I come.
Now, I’m not an economist or a financial planner, or even someone who is very good in math, but I think I can clearly explain the complex economic and financial nuances of what the government is proposing in their economic stimulus package. Here’s how I understand it works: A) They give us money. B) We spend it. C) The recession goes away.
Federal Reserve Chairman Ben Bernanke likes the plan to boost the economy by putting money into the hands of those who would spend it quickly. Which brings us to another great reason to be an American; it’s an election year — if you haven’t noticed.
Bush and the Republicans will tell you that any economic stimulus needs to include incentives for businesses, while the Democrats will tell you that it’s the low and middle income families that are most likely to spend their rebate money the quickest. Great election year tactics, and you just thought buying votes was a no-no.
Of course the key to this economic stimulus plan is that we, the American people, need to spend the rebate as fast as we get it — which should be no problem for the average American who likes to spend money. In a country where the average household carries a credit card debt between $8,000 to $9,000 and more than 40 percent of its population spend more each year than they earn, spending money should be as easy as buying a house with a loan that’s got a sub-prime interest rate.
Now, by increasing consumer spending (that’s us, we’re the consumers) we make the nation’s retailers happy (that’s Wal-Mart, Big Lots, and Goodies) because of increased consumer (that’s us) confidence. This upturn in consumer (us again) spending leads to an increased demand for products (made in China) resulting in an increase of employment (more jobs for the Chinese) which makes the stock market happy (Wall Street inside traders) causing the markets to rise which leads to a stable and stronger U.S. economy (still able to buy $100 per barrel oil.)
Here’s my dilemma, and I’m sure I’m not the only one who doesn’t want to play by the president’s and Mr. Bernanke’s rules. If I get a rebate I would like to save it. OK, call me un-American, but I don’t want to spend it on self-gratifying junk I don’t need, but rather save it for my daughter’s college education.
With the stock market falling over 9 percent since the first of the year (fallout from greedy and unscrupulous mortgage lenders, Merrill Lynch reports $15 billion in losses from bad home loans, housing starts at a 16-year-low), my daughter’s college investment fund has taken a substantial hit. With her going off to college in the next year, saving the tax rebate could help offset any potential losses.
But here’s the Catch-22 in saving the money. If I don’t spend my rebate, I’m not showing consumer confidence and this will hurt retailers who will now not need to stock the product I’m not buying. This results in a downturn in manufacturing, which contributes to layoffs and increased unemployment. Again, this will lower housing starts and create investor uncertainty, which will cause the market to continue its downward slide, further devaluing my daughter’s college fund.
Save for my daughter’s education future or spend for my country’s economic future? I’m sure when the time comes I’ll figure it out. Despite the uncertainty that I and many other Americans face (OK, maybe 10) over how to best spend or save our rebate, this is still a great country. Hey, this year we even get to pick a new president. Man, it just keeps getting better all the time.