Clarification On The 'Stimulus'

I feel that I should clarify my previous statements on the current fad of economic 'stimulus'. I have been speaking fairly positively about the stimulus package Congress is tossing around, and I want to be sure I don't misrepresent myself.

The way I see it, there are two separate issues here. First, the concept of returning money to Americans who pay taxes. This part of the stimulus package is absolutely a slam dunk, and as such it should be widely applauded. Anytime the government gives money back to where it belongs -- in the pockets of American taxpayers -- is a good thing. Bush's tax cuts were the key to the last seven years of roaring economy. And yes, the economy has been roaring, despite the headlines (even the New York Times accidentally acknowledged it recently, and I'm planning to blog about that more in a future post). That's why the tax cuts need to be made permanent, and more need to be implemented. Putting money into taxpayers' pockets means that people have more money to spend and save, and that means they sink it back into the economy and into investments for the future. Win-win.

The second part of the stimulus package, however, is all negative. First and foremost, it won't stimulate the economy. It's a short-term gift rather than an actual stimulus. One of the biggest holes in the plan is the fact that this tax 'refund' isn't going to the biggest taxpayers in the country - the rich. As it is currently written, these refunds will only go to people earning between $3,000 and around $150,000 a year. As I've blogged about before, the rich pay the bulk of the income taxes in America (top 5% of wage earners pay 57% of all taxes), and they're getting blanked by this 'stimulus'. Along the same lines, these refunds are not being given according to contribution level (i.e. tax rate); instead, everyone is getting the same amount. This is inherently unfair to those who make more, and extremely generous to those who make less. Also, these 'refunds' will go directly to the national deficit, which isn't good for anyone in America.

This is, in reality, an income redistribution. Socialism. A common ploy during an election year - politicians always seem to rally around the checkbook when voters start paying attention. It is not fair, and it will not stimulate the economy for any sort of long term.

If Congress truly wanted a stimulus, they'd make the Bush tax cuts permanent, lower or eliminate as many other taxes as possible, and, if it must be done, provide refunds to people on the basis of how much tax was paid.

This measure is typical Washington style-over-substance designed to let politicians pat themselves on the back over how generous and wise they are.

Don't get me wrong, I'll gladly cash my check! I just wish Congress and President Bush would do something more meaningful. Hopefully they'll get that done later this year.

There's my two cents.