Stimulating Stimulation Package

Today the house approved what is being called an "Economic Recovery Plan". The bread and butter of this plan is basically a tax refund check for individuals of $600.00 and couples filing jointly of $1,200.00. To qualify you have to have at least $3,000.00 in income with more of the money going to those that have children and less going to the upper echelon of the taxpayers.

The plan is currently at approximately 146 billion dollars, but could be added to by billions more when it goes through the senate. The senate has plans to reduce the amount of the refund per person, but add to it billions of dollars earmarked for seniors and those that are unemployed. Why exactly would we give a tax refund to those that are unemployed? Didn't make sense to me either. Also, the senate's plan would include checks for all taxpayers including the very wealthy. Sounds good to me, I mean if we are going to throw money at a problem who cares who picks it up, right? Also included in both plans is incentives for small businesses for purchase of equipment and other business related purchases. I couldn't find much detailing either sides details of the small business portion of the bills.

Now for my take on this mess. The trouble all leads back to the housing industry. Everyone thinks that the economy is doomed to turmoil until the housing market heats up again. This may be true, however the artificial stimulus is going to help for about 30 days. Everyone is going to get their checks, blow 'em on beer and strippers and go back to hating life. We have enjoyed a long ride on the housing bubble, but as a wise man once said, "The party's over and now it is time for the hangover". Why can't anyone see this for what it is? There were so many new homes and homeowners added to the market so quickly that the market didn't have the opportunity to acclimate the new growth in a stable manner. There is going to be a period of pain, no doubt about it, but if we are not careful there could be even more pain. The Fed ripped the scab off last Tuesday. They couldn't let it heal because they are afraid of walking through the painful period that is inevitable. The Fed's job is not to save the housing industry just like the governments job is not to save the consumer from themselves. The Fed's job is to guard against inflation and the governments job is to protect the rights of personal property. Let the market heal itself, that is what it does. The markets have always been cyclical and will be in the future. This time it is going to be a particularly painful down period, but then again it was one hell of a party.