I’d like someone to explain to me how sending people a check for a small sum of money is going to help lift the economy in the long term. It makes no sense to me.
I admit, I’m not entirely sure. I think they’re hoping people will spend that money, and in the process, spend MORE money, rather than just keep it all stored away in savings, to keep the economy moving?
What guarantee is there that this money will be spent, exactly. That’s in addition to the fact that its really not that much in the greater scheme of things. Its not going to compensate for the millions of people who lost their homes.
The government is essentially hiding the “Oh shit! We fucked up! Um… here’s some money. Go give it to the guys who got a REAL tax break!” as “Here’s some money. America is doing just fine. Enjoy it!” There have already been many news sources saying how it is more beneficial to the economy to SAVE the stimulus chequerather than hope it “trickles down” to you again by a millionth of a penny.
Man I’d like a government-funded 360 Elite with Rock Band.
In short, they are hoping that a small, temporary burst in spending will create good enough economic indicators to contain the downward trend, so the next administration will have to deal with it. They have no idea how to fix the larger problem. In their defence, there might not even be a way to fix it, other than letting events take their course.
The scope of the problem goes beyond recent events, and beyond this administration. In the past twenty years, the rest of the world invested large amounts of capital in American markets. Eventually, this created a kind of economic narcissism – American society appeared to believe that it could continue to get something for nothing, forever. At the individual level, many people assumed that they didn’t have to save money anymore, because home prices would always continue to rise, and this would be enough to ensure an easy retirement. They were encouraged in this delusion (perhaps even deliberately misled into it) by the over-availability of credit, which banks handed out indiscriminately, while relying on foreign capital to pay for their wildly speculative activities. Eventually foreign investors realized that it was dangerous to buy risky assets, and started switching to safer ones.
But it’s hard to blame ordinary people when the government itself runs on much the same premises. The administration started a foreign war that costs a billion dollars a day, and wants to continue it indefinitely. Even putting aside the debate over that issue, there are only two ways to pay for such a thing: a) raise taxes, or b) print/borrow money. Of course a) is out of the question, especially now in an election year, so b) has been adopted as national policy. They want to persuade foreign investors to recapitalize the US banking system, without letting them invest in solid companies instead of risky, speculative debts. In some sense, they may be gambling on the continuing fall of the dollar, hoping that this will bail them out of debts they can’t possibly pay.
Absolutely, greater savings could eventually offset the decline in wealth that people are currently experiencing. But, unfortunately, when inflation is increasing (and rising food/gas prices are basically a form of inflation), even a completely logical person may decide not to save. What is the point of saving if your savings will quickly lose all their value? It is similar to the concept of Zugzwang in chess – even the most logical move is still a losing one.
The idea is that we’ll take our few hundred dollars and be shameless consumers with it. Like when you get a tax refund, you don’t feel guilty spending it for pleasure, since you’ve already accounted for your needs with your paychecks. People are saying, “I’ll go to Best Buy (always Best Buy) and get that x I’ve been wanting!” Which, done by 100 million people, could actually affect the economy – and maybe psychologically counter the recession-mindset that seems to be settling on us.
It’s not supposed to help.
It’s just supposed to con the rubes into still playing. "OOOH A REBATE. MONIES BACK! SHINY SHINY SHINY! (buy yourself some bread and circuses our system is perfect and vote for our guy in 08).
Buy another ticket. Maybe your ball will knock the bottles over THIS time.
So in short, it isn’t. They just wish you wouldn’t think about it enough for it not to make sense.
These desperate tactics are what you get when you cut taxes while increasing spending
What you meant to say was GH3, because RB is too easy.
As everyone has already said, it’s more or less an attempt to slow down the oncoming depression by trying to pump more money into the economy. It’s a fucking horrible strategy for the following reasons:
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A lack of available revenue is not the reason for the current economic recession. Rather, it’s been caused by the depleting of oil, horrible overuse of credit, a mortgage crash fueled by speculation and crooks, a nearly default national debt, and a war that costs a billion dollars a day. Trust me, giving someone $300 is not going to be enough to turn this around.
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Printing money does not raise the value of the currency; rather, it increases the supply, thereby causing the value to drop even further.
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It doesn’t address ANY of the real reasons for the oncoming depression. There’s no sign of pulling out of Iraq, there’s no emphasis on creating alternative fuel sources, it doesn’t address the rising cost of food, etc.
(Gallo-note: Disregard anything below this sentence. I mean it. You shouldn’t even be reading this right now.)
I don’t think there’s anything that can be done to fix the economy at this point. In fact, our trying to fix previous recessions may be partially to blame for how bad things have gotten. If anything, they should shift taxes from penalizing the middle classes and poor and instead focus on the wealthiest segments of the country, thereby opening the door to more potential federal revenue. At the same time, we need to stop jacking up minimum wage (which only speeds inflation up and drives business away) and start getting jobs back for all levels of society. Finally, we need to get the fuck out of Iraq. Screw the civil war and additional black eyes we’ll receive; we fucked up, we’ve been fucking up, and we need that billion dollars a day BACK.
(Note that I have no understanding of economics; I’m simply too drunk on cake to care at this point.)
Hades: Rock Band is easier, yes. It’s also more fucking fun and versatile than Guitar Hero.
What Kaiser said. It’s a ploy to draw our attention away from the obvious.
A nation’s psychological state largely determines its economic health. How motivated are people to work? How stimulated toward creativity? How willing to spend? How determined to compete? All matters of psychology.
Your prophecies of economic disaster will be self-fulfilling. “No,” you say, “This rebate will do nothing, it is a ploy for simple people.” The more people you convince, the less the rebate will accomplish: the fewer people will be “tricked” into behaving as consumers, the less they will be excited at the chance to buy the products they’ve been longing to buy, the less our economy will get the jolt it needs. As the rebate flops, our investors will withdraw their investments, our potential entrepreneurs will decide that now’s not the year for brilliant new ideas, and so forth. And if only you weren’t so “clever” (read: depressive) as to see through this “ploy,” the market might actually have recovered.
“Our true concerns should be tax reform and the better allocation of resources,” you wisely assert. But all you’ll accomplish is to re-split a pie that’s too small to begin with. Everyone whines that party x is being better treated than party y. And nobody is bold enough to say, “Maybe everyone’s dissatisfied because <i>there’s not enough to go around</i>.” If we’d stop pointing fingers and prophesying doom long enough to get motivated, we might actually make that pie bigger.
THE PIE IS A LIE.
Not to mention the fact that RB needs friends, and TD… well. You know.
Even the will to power must give way to fundamentals. The overriding reason for the “smallness” of the pie is a long-running policy of spending money that we don’t have – profligate spending, fueled by the easy availability of credit, on the assumption that foreign investors will continue to underwrite it in perpetuity. Since the Reagan administration, the general mood has been that we can rely solely on our “image” or “psychology” to attract foreign capital – in other words, that we can always get something for nothing, forever, as long as we just believe in ourselves enough. Foreign investors are evidently beginning to tell us that we can’t, not unless we let them co-write the rules of the game. It’s their “depressiveness” that you should berate – only I doubt they’ll listen.
There is no quick “fix” to this, except working more and saving more. But the same mentality of “if you want something that you can’t afford, no matter what it is, just buy it now anyway” that caused people to fall for the subprime bubble, also affects the government. Debating the fairness of the tax burden one way or the other is totally irrelevant at this point. At present, neither party shows any desire to reduce the government’s astronomical and wholly unnecessary spending on political and ideological causes. If it doesn’t raise taxes, then the only way it can pay for what it wants is to print or borrow money – thus devaluing its own tax rebates, and making it more difficult for people to save. There is no free lunch.
The main problem with Xwing’s argument is that its a lot of fluff that’s dependent on a lot more variable than what’s been mentioned. A nation’s “psychology” is the culture of its generations. These things take decades to evolve and mold and people aren’t just inert blobs of flesh waiting for things to act on them so they can know if they’re happy or unhappy. They are active contributors in their own misery and there are consequences to the variety of actions that shape their society. Americans allowed Bush to send troops to Iraq. They are responsible for the shit they’re in now. The housing bubble took years to grow and develop and was nurtured by all kinds of segments in society. To all this we can add the role the media plays in providing information to people, the tone of the information, the topics of information (BRITNEY! wee!). And to treat the entire population like homogeneous mass is ridiculous considering the diversity of opinions and jobs across the country. It is absurd to think you’re going to reverse all this “depression” by giving people a check or 2 for a few hundred if not a thousand dollars because you’re not unfucking their lives or undoing the bad calls that screwed the country over. Any change will take time. Another example of that would be the situation with science and engineering. North America and other western countries are going to be overtaken by other parts of the world that got off their collective asses, did the work, went to school and didn’t waste time bullshitting about intelligent design in a crappy excuse of a biology class whose requirements are continously toned down to protect the poor psyches of the troubled souls who can’t handle it. The result will be that in 50 years, we’re going to be stuck holding the bag. This kind of intellectual base takes generations to build. Where are the people going to come from? Again, not a quick fix solution and the cause? A culture of decadence.
Investor’s don’t just invest when people are “happy”. They invest when they can expect a reasonable rate of return. How happy people are doesn’t matter. Case in point: the Palm Jumeirah in Dubai. The people who built it are poor imported laborers that now crowd the streets in Dubai. It doesn’t stop investors from going in and pouring money into the building an artificial formation you can see from SPACE.
Undeniably, irresponsible spending has taken a large slice from the economic pie. And despite your characterization of the Reagan-era government, it did curtail some of the spending excesses of the 1970’s: e.g., it cut funding to bloated government agencies and created the Office of Management and Budget to review agency expenditures. Reagan tried to streamline the government. Some would argue that those seeds of efficiency bore fruit in our economic success in the 1990’s. And if more recent excesses by the Bush administration have reversed that progress, we’ll clearly need to cut back on spending again.
But to respond to our current situation by forecasting gloomy economic weather for the next 5-10 years is misguided, because 1) government spending is not the only factor in our economic well-being, 2) you’ll convince people to expect an economic slowdown, and 3) expectations of economic slowdown are a huge factor in ensuring that such a slowdown occurs. People who worry about an impending recession stop spending money on consumer products, out of fear of losing their jobs and needing cash to fall back on. With less cashflow, businesses cut back their operations. The middle and upper classes who run those businesses stop investing in the stock market, because they believe it’s going to fall. They buy up land and <i>don’t use it</i>, since they <i>know</i> that way they won’t lose money. In short, expecting a recession is a recipe for a recession.
What will a tax rebate do? Well, maybe nothing. It won’t fix government overspending on Iraq, social security, and so forth. But if enough people respond to the tax rebate by <i>spending it</i>, it’ll hopefully have the same effect as the pointless jobs that Roosevelt handed out during the Great Depression (planting trees with the CCC), or the wasteful war thereafter: it may inspire people to forget their petty personal woes and get back to working and spending, which in turn will give businesses and investors some motivation to use their money productively. <i>That’s</i> what the tax rebate’s supposed to do. And my central point is, it’ll only work if we believe it’ll work.
I don’t mean to discount your arguments about government overspending, SK, but the issue of consumer behavior is a separate one that warrants separate treatment. Sinistral, you characterized my argument as fluff, so above I’ve offered the mechanism behind that fluff.
You didn’t really address anything I said about the issue you brought up, the psychology of a nation.
You didn’t even really respond to SK, you just started quoting all kinds of things that aren’t related, like Reagan. Reagan’s actions aren’t pertinent here at all. I also find it impressive that you would dismiss US involvement in WWII.
Bottom line is, you can’t expect a potential bump in sales to revive a struggling economy when the people themselves have no savings or economic security to begin with. Even if people do go out and spend their money, they can’t keep spending money after a short bump in economic activity because they won’t have any money to spend.