By Dave Lindorff
When you hear a number like $100 billion (the amount Bush is proposing to give back to people in the form of tax rebates, at about $800 per adult family member) or $145 billion (that $100 billion, plus another $45 billion in business tax breaks—mostly accelerated deductions for capital investment) bounced around, it sounds like a lot of dough, and you might think it would be a good shot in the arm for an economy that is falling into a dead faint.
But let’s think about it on a micro level.
What would my wife and I do with an extra $1600?
Well, to be honest, that’s not quite one month’s mortgage payment.
If we were smart, we’d probably use it to pay down some principle on our credit line, which would over time get us out from under on that dreaded monthly bill a lot sooner. But if we did what most people are likely to do--pay off some bills with it, or one month's mortgage, chances are, given how hard we're all working just to keep going, that we'd then slack off somewhere else just to catch a little break--maybe turn down one assignment, or if we're on an hourly job, turn down some overtime and catch a little more shuteye--and in the end, we wouldn't be adding anything to the economy at all.
But then there are the cars. They both need servicing. The Volvo, a 1993, is suffering from a case of electronic lock collapse syndrome: the right rear door can no longer be opened. It’s frozen in the locked position. The lock button on the driver’s door came unconnected from the latch mechanism inside the door too, so that door has to be locked and unlocked from the outside with the key. And I figure it’s only a matter of time before some of the other doors get frozen in locked position, which could get really ugly when I need to drive with more than one passenger. So I could use probably $1000 of that rebate to get that mess fixed. That would leave $600 for two alignments, two tune-ups and some new tires.
If I were to do all that, I suppose that would be a little boost to the economy, but not much. It certainly would be nice for the auto electric shop guy, but it’s not going to do much for Detroit. Trust me—that extra $1600 is not enough to tempt me to go out and buy a new car. Heck, it’s only about a down payment and two monthly payments on some piece of junk from the bottom of the Chevy or Ford line-up, and after that I’m stuck with payments for four more years. No, I’ll be staying with my old Volvo and the 2001 Honda Civic.
I suspect most Americans are in the same boat. If you have to worry about the future of your job—in my case a continued flow of assignments from various magazines that keep me afloat—you’re not going to go out and buy some big-ticket consumer item just because you got an unexpected $1600 check from Uncle George in Washington.
Economic theory, regarding the "velocity of money" and all that, says that if I do get the Volvo door problem fixed, and if I do buy those new tires and get the cars tuned up and aligned, that money I spend will flow through the economy, making everything hum a little better (not the tires though, since they're probably made overseas so the extra dollars just get lost to the US economy). That’s probably true to a point. The auto electric guy is likely to get a little pick-up in business—mine and other people with door and light problems they’ve been living with for a while. But will it be enough to convince him to go out and hire another employee? I doubt it. Will he invest in new equipment? Nah. I doubt he’d do that, and even if he did, it most likely would be imported too, meaning an end to the stimulus chain. More likely, he’d take his extra dough and go get his pick-up repaired. It’s belching a bit of smoke these days, and looks like it could use some engine work. But again, I doubt that he’ll be ordering a new F-150. And any parts he buys for his vehicle are likely to be imported too, thanks to globalization. That’ll be good for Mexico’s or China’s economy, but not for ours.
Besides, the thing is, we all know that those IRS rebates are a one-off thing. It’s not like they’re going to make this a regular yearly surprise. So you’d have to be an idiot to take the money and pump up your life-style.
And then there’s another problem. By adding another $145 billion to the budget deficit, the government is contributing significantly to inflationary pressures, and when those gnomes in Zurich, London, Tokyo and Hong Kong see that, they’ll bid down the value of the dollar even more. Our once mighty currency, now worth only half a pound Sterling in Britain, or just over 100 Yen in Japan, is shrinking faster than the polar icecap. And that means that all the products we depend on—our tools, our dishware, our clothes, much of the food we eat, and of course our oil—will get more expensive.
I don’t know about you, but my wife and I spend basically every penny we earn each year, in order to make ends meet. Now some of that is for stuff like mortgage payments, tuition payments, etc., but I’d guess that, counting oil and energy bills, probably half our income goes to buy things that are imported, and that’s probably roughly true for most American families. After all, almost nothing is actually made in the US anymore, and we even buy a lot of raw materials—iron, oil, etc.—from overseas. So if for sake of argument and easy math, we’re making $100,000, that’s $50,000 being spent on imported stuff. Now here’s where things get a little speculative. But suppose that having the government add another $145 billion in red ink to the federal budget leads to an extra 3 percent decline in the value of the dollar against foreign currencies—a not unreasonable scenario. Why, that would mean that the $50,000 I spend on foreign goods in a year would cost me an extra $1500—just about the same amount as that $1600 Bush is proposing to lay on me.
But…that weakened dollar will continue into next year and beyond, while the $1600 rebate is a one-time thing.
So what do we get out of this rebate thing?
Worse than nothing.
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http://www.thiscantbehappening.net
Dave Lindorff, a columnist for Counterpunch, is author of several recent books ("This Can't Be Happening! Resisting the Disintegration of American Democracy" and "Killing Time: An Investigation into the Death Penalty Case of Mumia Abu-Jamal"). His latest book, coauthored with Barbara Olshanshky, is "The Case for Impeachment: The Legal Argument for Removing President George W. Bush from Office (St. Martin's Press, May 2006). His writing is available at http://www.thiscantbehappening.net
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Ernest is not a professional writer. Nor well educated in political affairs. However, he has uniquely experienced life styles of those who have little. |
And they say Karl Rove.......... is out of the Whitehouse...........I think he's just out of site..........Dave, in my opinion, this whole tax thing is being concocted by both Parties to distract the American Public from the REAL issue of "taking over the economy by the corporate elitist"..........the Corporate Hogs can't pull it off without inside help from the government on all levels.............. If the American People think it's bad now............."they ain't seen nuddin yet"..................wait until gas prices go up to $8-$10/gal ranges.............as soon as this election is over we will see it happen............... At that time, we will be trading in our 1990 Volvo's for bicycles..............the problem with most Americans is they have never been to other countries or have seen a country destroyed by the "Corporate takeover"............What else can be said..........most Americans don't even possess a Passport.............For example in Moscow Russia 90% of mass transit is by underground metro, trolley cars and buses(that's all they can afford)..........there are more cars here in Kabul Afghanistan than in Moscow...............the Supermarkets in Moscow are owned and subsidized by the government or government affiliates, so you eat what's available..........and to keep the people suppressed, they keep the Supermarket shelves full of vodka or their best selling spirits.......Consequently, there are more whiskey stores than gas stations............... End result.............Mafia.............everything is owned by the Mafia...... by
Ernest (0 articles, 0 quicklinks, 0 diaries, 130 comments)
on Saturday, January 19, 2008 at 1:20:01 AM
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Voluntaryily retired local California county elected official. |
The economy I agree with everything Dave has said. But in my opinion this whole economic fiasco is deliberate. Does anyone remember the German economic spiral into inflation in the 1930s? This inflationary catastrophe was one of the reasons Hitler was able to be elected -- he promised relief. Also, does anyone remember the Executive Order Bush issued on May 9, 2007, in which he confirmed the direction the government would go if there were a catastrophic emergency. This is defined under Section (1) (b) of the Order: "Catastrophic emergency means any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severly affecting the U.S. population, infrastructure, environment,economy, or government functions." (Italics mine) In my opinion which I expressed last year in an OpEd article, "Onward, Christian Soldiers", this Administration is simply carrying on the Plan for a New American Century (PNAC) to establish a country where the elite rule by whatever means -- whether by class, economic status or corporation is unclear. What is clear is their intent. by
Shirley Bianchi (8 articles, 0 quicklinks, 0 diaries, 82 comments)
on Saturday, January 19, 2008 at 12:45:40 PM
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I am a social worker who works with chronically mentally ill people. Like enjoy reading, quilting and visiting with people |
Rebate The $250-$800 rebate is just a way to pat us on the head and placate us so that we do not revolt. The money would be much better spent on helping the vets, improving the roads, schools, buying medications and food for the poor and rebuilding NO so that people can go home. by
beccy (0 articles, 0 quicklinks, 0 diaries, 87 comments)
on Saturday, January 19, 2008 at 1:46:33 PM
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Mr. Danforth is a supporter of the Constitution of the United States of America, as defined by Thomas Jefferson. |
Gimme my handout Will people spend their give-away money on more Vulvas, Hondas, and trinkets from China? Who is supposed to pay back this debt as manufacturers flee the country? by
John Danforth (1 articles, 0 quicklinks, 4 diaries, 87 comments)
on Saturday, January 19, 2008 at 3:04:22 PM
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George Bush: the best reason not to believe in intelligent design. |
No tax rebates will fix the mess made by "FAIR" trade A few dollas apiece will not help the mess that is the creation of FREE trade. First, the free trade agreements must be scrapped. Then they must be replaced with FAIR trade agreements. Then, all companies that have moved any operation out of the US will be given 30 days to detail how they are going to return that operation to the US, or the products that are now being imported should be taxed to the point they will not sell. This will return the jobs that are needed to support the economy, or will provide tax money from the tariffs to replace the lost wages. by
kanawah (0 articles, 0 quicklinks, 0 diaries, 39 comments)
on Saturday, January 19, 2008 at 11:54:55 PM
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