Joe Blow Needs Spending Money, Not Tax Cuts...Is this guy serious???

Discussion in 'Wall St. News' started by S2007S, Jan 29, 2009.

  1. S2007S


    This guy is sooooo desperate to get this economy back to where it is he has an idea for something called vouchers....

    His idea stated in this article is this:

    "Solution? Issue vouchers to individuals or families that can be used to buy goods and services and that expire after a set period of time, say, a year, meaning they can’t be saved."

    Now I dont know about you, but this is quite pathetic, vouchers so that the consumer can go out and buy more garbage they dont even need, just to stimulate and economy for a few months so we can see the GDP bump up .5%....explain the need for this???

    Why cant anyone acknowledge that recessions are part of a cycle, that with good times come bad times, that preventing them and trying to throw money at the problem is only going to do worse for this economy. Why does "JOE BLOW" need more spending money, does Michael Sesit not understand that the reason we are in this position today is due to the wild credit bubble that was built on monopoly money. So fixing the problem we are in now is to give the average joe blow some money so he can buy another large 52" tv or a new "suit" this going to help the economy thrive once again, no its not, this is the most idiotic idea I have ever heard of.

    The only thing that is going to get the economy out of this deep recession is TIME, if you could buy some time I think that would be the best investment you could find.

    Joe Blow Needs Spending Money, Not Tax Cuts: Michael R. Sesit

    Commentary by Michael R. Sesit

    Jan. 30 (Bloomberg) -- Assume you are Joe Blow, the consumer.

    You have two houses, both with mortgages. You and your family live in one. The other one you can’t sell right now or rent for enough to cover the taxes, upkeep and mortgage.

    You also have monthly car payments, tuition bills for two children in college and you are shelling out more than 20 percent a year to finance several thousand dollars of credit-card debt.

    Then as part of a broad-based economic stimulus program, the government cuts your taxes or offers you, say, a $1,000 rebate. Human nature and history suggest that you will use the money to reduce your debts. And even if you weren’t in hock up to your eyeballs, the odds are you will deposit the extra cash in the bank -- rather than spend it -- especially if you don’t feel secure about your job.

    It’s a reaction that U.S. President Barack Obama’s administration ought to acknowledge as it seeks to push through its stimulus package. Buffeted by plunging stock markets, falling house prices and an accumulation of debt, Americans are prone to save. And the more people save, the less effective the stimulus.

    About a third of Obama’s $819 billion economic stimulus package, or $275 billion, consists of tax cuts for individuals and businesses. Consumer vouchers would be a smarter and more rewarding way to go. The package was passed by the House this week and now goes to the Senate.

    Low Spending Rate

    Less than half of the personal tax cuts, or rebates, included in the Democratic Party’s American Recovery and Reinvestment Plan will probably be spent in the first two years, according to Lawrence Mishel, the president of the Economic Policy Institute in Washington.

    “The rest will be used to pay down debt, build savings or buy imports, none of which help boost the U.S. economy,” he says.

    Solution? Issue vouchers to individuals or families that can be used to buy goods and services and that expire after a set period of time, say, a year, meaning they can’t be saved. That guarantees the increased deficit spending and 100 percent of the $275 billion will be devoted to boosting demand -- the object of the stimulus program.

    With vouchers in hand, people could pay for a restaurant meal, purchase a television set, buy a new bike, treat themselves to a new suit and get a haircut. Even if they don’t need anything new, they will use the vouchers rather than let them expire. Or they could always donate them to charity.

    Economic Key

    Accounting for about 70 percent of U.S. gross domestic product, consumer spending is the key to reigniting the economy.

    Early last year, Congress passed, and President George W. Bush signed, a $168 billion stimulus bill whose centerpiece was about $100 billion in personal-tax rebates. Only about a third of the rebate checks, which ranged from $300 to more than $1,200 for some families, were spent, Mishel says. Others put the unspent portion as high as 80 percent.

    “It was not an effective way to get the economy back on track,” Mishel says,

    A survey of people eligible to receive tax rebates of $300 or $600 in 2001 found that only 22 percent of households receiving the money spent it, according to a study by Matthew Shapiro and Joel Slemrod at the University of Michigan.

    “The low spending rate implies that the tax rebate provided a very limited stimulus to aggregate demand,” they wrote.

    Even when tax cuts are employed, they should be aimed at people likely to spend money, rather than save it, Olivier Blanchard, chief economist at the International Monetary Fund, said in late December.

    Bone to Republicans

    Obama’s proposed cuts are politically motivated -- a bone thrown to Republicans, who embrace lower taxes. The president’s desire to promote bipartisanship is a laudable goal. Yet pursuing it at the expense of sound economic policy is a high price to pay. Obama has enormous public support and doesn’t need Republican cooperation to pass his stimulus program.

    Tax cuts are also politically hard to reverse, which will eventually be necessary once the economy is back on its feet and inflation picks up. Cancelling a voucher program is easier.

    A voucher project can be initiated as quickly as a tax- reduction strategy. Both would be faster than spending on infrastructure. Since all vouchers would be spent, the “multiplier effect” would also be greater than tax cuts.

    What’s more, vouchers sidestep the conservative claim that taxpayers, not government appointees, are best suited to judge how to spend the public’s money. Tax breaks for businesses make even less sense than they do for individuals: Companies aren’t going to be big investors when the economy is plummeting.

    They tend to delay increasing investment or hiring until demand has already begun to pick up, especially if they are in industries plagued by overcapacity. Companies are also more likely to save, and not spend, any refunds they are awarded if allowed to apply recent losses to past years’ performances.

    Vouchers aren’t a long-term solution to America’s economic ills, but they would be more effective in limiting the recession’s pain on the road to recovery.
  2. He's halfway there.

    We have the right Presidente for it.
  3. Mvic


    In lieu of a major tax overhaul like that proposed by the independant/bi partisan folks at, the simplest and most effective tax stimulus would be to eliminate the payroll tax for both the individual and employer.