1. mikethemadbiologist
  2. Bartlett Is Half Right About Those Refund Checks

Bartlett Is Half Right About Those Refund Checks

By mikethemadbiologist on March 28, 2008.

In the NY Times, economist Bruce Bartlett opposes the refund stimulus plan:

WITH unusual speed and cooperation last month, George W. Bush and Democrats in Congress agreed to a tax rebate set to be paid out beginning in May. Families will get checks for $300 to $1200 or more, and it is assumed that they will all rush out to spend this money immediately, giving retailers a boost that will raise economic growth.

Despite the bipartisan support for the rebate, few economists have supported the idea. They note that we have tried rebates in the past -- most recently in 2001 -- and there is no evidence that they have meaningfully stimulated either consumption or growth. By and large, people saved the money they received or paid bills (which is the same thing); very few used their rebates to increase spending.

I agree: most won't spend, unless they have to (and any whose income is that bad needs long-term financial help--$600 isn't going to cut it). While I disagree with Bartlett's suggestion to help Fannie Mae buy up some of the bad loans, he is right that it won't do much in the way of stimulus. What would help is if the $300-$1200 per household were split between the muncipality and the state in which that household resides.

Most local and state governments are suffering from budget shortfalls due to property tax revenue decreases and lower sales tax revenues. Most also have outstanding deferred maintenance problems. If given the money, they will spend it--all of it.

Tags
economics
taxes

More like this

Another Tax Rebate? Give It to the States Instead
Nothing could be a greater waste of taxpayer dollars than the proposal floated by the Obama administration to give every household another tax rebate (supposedly $500). In fact, it's probably one of the few things that conservative economist Bruce Bartlett and I would agree on. Last March I wrote…
Sunday Sermon: In Defense of Deficits
Well, I suppose the snarky response is that your household doesn't have direct control over multiple battle carrier groups. Joking aside, the fixation on reducing budgets is essentially the economic equivalent of flat-earthism. James Galbraith, in a must read piece, spells out why public deficits…
When the States Cut Spending
A month ago, I told you the rebate was the wrong kind of stimulus plan, that the best thing to would to be to give the money to state and local governments. Why? Because the states and municipalities will have to cut spending as property and sales tax revenues plumet. And now, when it's too late…
Maybe the Australian could employ a solar power PR person for balance?
Last Tuesday Matthew Warren [reported] in the Australian: Labor plans to rid Australian homes of off-peak electric hot water systems, in a move it claims will cut Australia's greenhouse gas emissions by 7.5million tonnes each year. ... Labor will keep existing rebates to encourage take-up of…

If one country could borrow its way to prosperity, everyone would be doing it !

Or just plain print lots of money.

I almost certainly won't spend any "refund" on anything I wouldn't have bought without it. But I certainly don't want my local or state government to get it, because I don't trust them to spend it wisely. Or even legally.

You look like someone whose knee has been hit with a rubber hammer, Mark. Take a look around you at the roads, the school buildings, the bridges, the parks--all that was bought with local and state government money. I can't guarantee that it was all spent 100% wisely or legally, but a huge chunk of it must have been, or those roads, buildings and bridges wouldn't be there. I'll bet the private sector wastes or steals 10 times as much on any given day.

By Michael Schmidt (not verified) on 28 Mar 2008 #permalink

Michael, take a look around me yourself. Do you have any idea where I live or what local governments have done with tax money here? And what the private sector does is irrelevant. That's their money. Tax money is my money.

You look like someone whose knee has been hit with a rubber hammer, Mark. Take a look around you at the roads, the school buildings, the bridges, the parks--all that was bought with local and state government money. I can't guarantee that it was all spent 100% wisely or legally, but a huge chunk of it must have been, or those roads, buildings and bridges wouldn't be there. I'll bet the private sector wastes or steals 10 times as much on any given day