I am not an economist. (The Update is at the end.)
(To prove that point, back before I went to law school, I was considering continuing to work full time and take night classes. Since it had been a while since I’d been in school I took two graduate level classes while working to see how it would pan out. One was microeconomics. The instructor was on the adjunct staff. He was a full time economist for a regional bank. He took a mathematical approach to the subject, which left me in the dark. I’d regularly ask something along the lines of “could you use words to explain that?” I ended up with an A. On the graded bluebook he wrote a note saying he’d enjoyed having me in the class as “I knew if you understood something, everyone did.” I was a teaching tool.)
So anyway, I’m not an economist. I can handle supply and demand, elasticity and that kind of stuff. The macro stuff is beyond me. That said, this new bipartisan economic stimulus bill doesn’t make a lot of sense to me.
From the Washington Post:
“Under the deal, nearly everyone who earned a paycheck in 2007 would receive at least $300 from the Internal Revenue Service -- $103 billion in total. Most people would receive rebates of $600 each, or $1,200 per couple. Families with children would receive an additional payment of $300 per child. Workers who earned at least $3,000 last year -- but not enough to pay income taxes -- would be eligible for $300.
“Overall, 117 million families would receive rebate checks, including 35 million with earnings too low to have qualified under an earlier Bush proposal that limited checks to income tax payers. Rebates would be limited, however, to single taxpayers with adjusted gross income up to $75,000 -- up to $150,000 for couples. Above that, the benefit would phase out until hitting zero for individuals with adjusted income of about $87,000, $174,000 for couples.
“The money would be borrowed and would increase the federal deficit.”
The plan would also allow some accelerated depreciation to businesses and allow expensing rather than depreciation over time on some purchases by businesses.
First, and I hate calling $150 billion not much money, but it is in relative terms. Total personal income in the U.S. is in the neighborhood of just under $7,000,000,000,000,000. (From a chart at the Census Bureau website. Just under $28,000 a year for people over fifteen in 2006: there were about 223,000,000 million of such people. I don't think, but I don't know, that this includes corporation income.) That is whatever the word after trillion is. OK, I looked it up, $7 quadrillion. Now, not every penny of the money made is spent, and I can’t find a source for the money spent each year; but, let’s assume only $1 quadrillion is spent. $150 billion is only .00015 of a quadrillion dollars. And, we aren't including foreign spending. How much of an economic stimulus is that? (Don’t attack my math, it may be wrong; but, whatever the right numbers are, the package is a very, very, very small part of the total money spent in the country in a year).
Second, a lot of the rebates won’t be spent. If you are making in the top range of say $100,000 to $174,000, you aren’t going to go out and spend an extra few hundred to few thousand dollars just because you got a rebate. You’ll spend what you planned on spending. The rebates at this level are not an economic stimulus.
Third, this is borrowed money. To do not much, other than to serve as campaign fodder for the pols, we’ll add to the deficit.
Remember, I told you so; and I got an A a long time ago.
Daniel Shorr on NPR this morning likened the economic impact of the rebates to a cookie. You tell your friend you have cancer. He says "that's terrible, here, have a cookie, you'll feel better."
