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"Rebates" to Stimulate The Economy? Right... Just Tighten The Vise....

vise grip I read today that the President and Congress are considering a bigger, better, bolder, brighter redux of the strategy that kept our micro-mini recession in 2001 under control-- rebates! The President's theory (and, of course, he's not thinking this stuff up on his own) is that by infusing cash into the economy now, especially cash that will get into the hands of our low and middle-income folks who are most likely to spend it right away and stimulate consumer spending, a prolonged recession can be avoided.

It's likely true that rebates would make quick work of providing a boost to our sagging economy, but isn't it also true that the boost would likely be only a temporary thing unless we fix the fundamental economic flaws happening around us? As I recall, the 'rebate' from 2001 was really just an 'advance' that ended up being tacked back on the following year-- presumably after we'd all gotten 'well' from our little financial malaise (we never really had it made clear to us that it was really just a loan to ourselves).

Is $800 per taxpayer really going to make a difference when unemployment is rising (California hit 6.1% it was announced today), real estate and mortgage have skidded if not flat out crashed as we all feel, food, fuel and other essential expenses are inflating (hey, think that $100 a barrel oil ISN'T going to hurt in a few months?), credit is locked in a vise grip, and people are just downright scared about their futures?

Rebates will make everybody feel good about as long as it takes for the administration to change and the repayment plan to come due. Ah, that's tasty medicine.

Chris Hendricks

Posted by Chris Hendricks on 01/18/2008 11:26 PM

Comments (37)

economy, rebate, recession, vise

37 Comments on "Rebates" to Stimulate The Economy? Right... Just Tighten The Vise....

JAN

2008

Spot on Chris.

It will be interesting to see what happens. And to see how the Fed proceeds from there...

My rebate will end up in the bank not the mall. Also, these rebates will just increase the national debt. It like using a band-aid for sutures after major surgery

Isn't "spending" what got the nation and some consumers into trouble?!?! Spending outside your means is the quickest way to get into debt, I just don't see how a "rebate" is going to address the underlying mentality of spend now, pay later....

I say eliminate the Federal Income Tax altogether for individuals and make a 15% sales tax on everything. Get taxed based on what you spend not make.

As a REALTOR, I agree with Republican views when it comes to tax breaks.

Dead on! a rebate is like a band aid it's an instant fix that goes over the wound but if you dont take the steps to take care of the wound before putting the band aid on, it will still be there and could be even more infected afterwards.

Increasing our national debt is a great recent republican tradition started by Ronald Regan who eliminated tariffs, sending jobs overseas and making us a debtor nation.

Chris, ah yes I wrote about this very same subject this morning around 6:00 am. I don't think that $800 or $1600 will make a noticeable dent in the hole that we have. Just a little to little, a little too late.

Congrats on the feature.

JAN

2008

Its another quick Fix

Chis askes...

"but isn't it also true that the boost would likely be only a temporary thing unless we fix the fundamental economic flaws happening around us?"

I worked for a bank many moons ago and I will never forget the branch manager. Now this branch manager was "old school". He would show up for the "strateegery" meetings then go into his office (his windows had curtain type sheers so you really couldn't tell if he was in there or not) and stay in his office seemingly doing something. Then about 12:30, like clockwork, he was out having "toddies" or golfing.

The showcase "strateegery" meeting was the one in which he said to us...."revenues are down so we need to save money on our supplies. No more paperclips. Quit ordering them". He hammered us on these stinkin' paperclips! True story can't make crap like this up.

My point is, according to Charlie Rangle D, George Bush R, or more likely his staff, Harry Reid, D, Nancy Pellosi D, and some other "R"'s all have been working on this little "strateegery" of their own together in a "bi-partisan" way as Charlie puts it. I would like to call it "OPERATION PAPERCLIP".

Now it seems to me the question Chris asks IS the Billion dollar question. (but who's counting?) It seems to me this is saving money on paper clips again.

Address the problem, put policy in place to address it and ride it out. You don't dump money in like this and I don't think this is what Bernanke was saying yesterday at the hearing. He said put a stimulis in place not throw money out of a helicopter.

Where is the "smart set" when you need them?

I think this is a bad idea unless you target the rebate for a certain thing or things to buy. If not, my rebate will be plunked down on my visa card to pay down my christmas debt, although I will save some to fill my gas tank. So who will profit? The oil companies and Bank of America. How will that help the economy? Both of them already have plenty of money. Now, if you make it so you have to buy something, like a new computer, or a car with the rebate, that would be a boost.

I think the only one (IMO) REAL answer is to somehow bring jobs back into this country. I used to be in manufacturing and remember back, seeing what was happening with companies closing up their plants and beginning to import from outside the US. They kept the warehouse and front office staffs, but 85% of the employees, the ones who worked in the manufacturing plant, were laid off. I thouht "what are all those people going to do?". Anyway, back then, the politicians had an easy answer: "they are going to become computer programmers". Somehow, I never did think that Jose the diesetter would become a programmer!

Now, even the engineers can't find work, and programming jobs are also outsourced, as we all know.

That's when I knew we were going to end up as we are today.

I certainly don't know if this could ever be done, but without manufacturing and the jobs it creates, this country will continue to have economic difficulties.

This feels like the "Mortgage Bailout" all over again. Sure, send me $800 - I'll thank you. But it is not going to change my life.

Seems to me we are in this mess from overspending by consumers. Now we give them money to go buy consumer goods?

6.1% unemployment? Go back a few years. It used to be that numbers like that were thought of as a boon. We have come off of a LONG economic boon, and the only real inflation problem is fuel cost. If we want oil to go down, get congress to offer up ANWR, and the price will drop very quickly (even before ANWR is running). The oil spike is just about the only thing we have that is pushing inflation.

Sorry, but the rest of the economy isn't that bad. Of course, I'm not hopeful for the year, seeing the stock market's start.

Chris:

When you have to be fighting everyday to get your money back from Phone Companies that overcharge you, Insurance Companies that refuse to pay for drugs that are covered in formularies, Internet Companies that increase their monthly subscriptions anytime they want to, Mortgage Companies that sold defective loans and now refuse to help out; in other words "Corporate Greed", the $ 800.00 rebate, to my eyes is only "charity". We have bigger problems to try to resolve.

Good morning, Chris

Early yesterday all the media was abuzz with talk of the "rebate". Someone (sorry I wasn't paying REAL close attention to the babble) stated that some democrats only wanted to give the rebate to those taxpayers making less than $150K per year because ones making more than that would probably SAVE and not spend it! How insulting! Taxpayers making less than $150K don't know how to save instead of spend?

No one thing (ie.$800 rebate) is going to straighten out YEARS of irresponsible spending by consumers and it hasn't slowed down much. Just take a trip to the local mall this afternoon. If the rebate materializes, I just be putting mine in the bank, thank you, regardless of what I made last year.....

Lets see if I recall this correctly. The last time we got a rebate for $300 to stimulate the economy weren't we taxed on that money the following year? Perhaps I remember that incorrectly. Any money the government rebates me goes into savings and not back into the economy. Perhaps the majority of folks spend it which is the point but I won't be one of them!

Chris, this is an election year. They have to do something. I agree, spot on but I'll take my $800.00!

I may be the only person in agreement with regard to the Government rebates. It worked before (rebates that is) and it will work again. The Government got all the money back (probably ten fold) in the form of increased tax revenue. Many comments have said that we got into this mess by people living outside of their means. I didn't know that the Government was in the business of telling people how to spend (or save) their money. While I agree that this is a temporary fix, they need to do something. I'm not suggesting regulating or controlling the market but it is well within the Governments responsibility to stimulate the economy. This is NOT a bailout, this is an investment.

Hi Chris,

In this day and age $800 doesn't go very far and won't even take the average taxpayer a month to spend on something necessary. It really is alittle too little and too late but all of us agree it will be nice to get.

I really don't understand the borrowing from ourselves to pay ourselves concept. The economy IS much more than that and you are dead on with energy prices and the residuals that come from it have inflated almost everything from services to goods.

I don't know how an $800 one time government handout is going to save me in the summer when my electric bills are $500/month.

Yes, it will be nice to get this money. I didn't pay all that much attention to the rebate in 2001, so I don't remember firsthand how well it worked. Hopefully this is just a beginning step to the government's plan to help the economy. I'm not an economist, but I'm hopeful for the best.

Thanks all for the responses-- seems we touched a nerve!

Doug: So far you look like the lone voice on your side of this, but you raise a great point that is worthy of calling out: our politicians ARE viewing this as an investment. By pumping this money back into the hands of people who will [mostly] spend it, the cycle of purchasing and collecting taxes on those purchases is prodded forward. The $800 will be spent by one person, then re-spent many times over producing a "feeling" that it's OK to spend again rather than to avoid spending and wait out these difficulties. In the short term that IS a decent strateegery (thanks for the reminder on that, Kirk!) but the long term issues still remain and must be addressed or we're merely delaying the inevitable.

Hey, I got my winter bill today... $318 the highest it has EVER been to keep my house at a toasty 65 degrees [from 5pm until 10pm and again from 7am until 8:30am when the setback thermostat allows the heat to be on...]. It's almost 10am here in Northern CA today and sunny outside. The ice is almost melted off the patio... but brrr, it's cold inside here. I'm spending my rebate on the PG&E bill and another fleece sweater!

ah... government intervention... again... spending....

Chris- I thought it was stupid in 2001, and I think it's a stupid idea now.

"Stupid is as stupid does...." F. Gump (1994)

I agree Chris. It's a feel good solution in an election year. It will make a difference to people who live from paycheck to paycheck. It won't buy a house. There will be alot of TV's bought!

Wayne: Ah, just what America needs: more televisions so we can be exposed to more ads for things we really don't need. I wonder how the pharmaceutical companies would inform us that we 'need' drug "X" if we didn't have those really cool HDTV sets in every room....

Wow $800, that should buy me 200 gallons of oil by the time the government issues the checks.... they need to Fix the problem, not keep patching it...

Simple economics can improve our economy. Make American business's more competative oversea's. Reduce the drag on the economy that is caused by a bloated goverment. Slash goverment spending, rules and regulations. America became the greatest country in the world through it's people and industry.

JAN

2008

hmmmm..may be he should just give us all 8 barrels of oil....lol. It is definitely true. If we keep putting in little fixes to make temporary relief, it's just going to make the end result more painful and inevitable.

JAN

2008

Great thing about these rebates is our great great grand children will pay for them and they will have never heard of me. Sad!

Dick: There are quite a few legacies we're leaving that our children's children's children will struggle to deal with on our behalf. Seems our will to prepare for future generations changed somewhere along the way....

JAN

2008

Well Chris...

It's much like putting on a proverbial band aid...This is not a long term solution.

I have come to understand that Big Brother knows he can count on human greed.

After all...It is one of the seven deadly Sins :)

TLW...ROAR!

JAN

2008

TLW: Seems $1200 extra dollars will go a fair ways toward more lust, gluttony, greed, sloth, wrath, envy, and pride. If we could only convince ourselves that living with less is living better and that acquiring more means actually having less satisfaction... but I digress.

Now...

That is what I call an excellent comment to a comment :)

P.S. No. I didn't get points for coming back. I've met my quota already :)

TLW...ROAR!

Every once in a great while I screw up and say or do something right. Not often, though.... ;-)

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