Monday, January 28, 2008

Free money!

This stimulus package is getting better all the time. At first, it was just a simple $400/$800 rebate for singles and couples who made a certain minimum income and paid a certain amount in taxes. Now? Well...

Under the House plan, individuals would receive rebates of up to $600 and couples may get $1,200, plus $300 per child. . . . Individuals must earn at least $3,000 to get a $300 rebate.

So there's still an income requirement, but there's no requirement that the individual actually paid more than $300 in taxes. Also, couples with children receive more money, although there is no indication that children cause couples to pay more in taxes. This is starting to sound like something other than a rebate.

Rebates would be phased out for individuals earning more than $75,000 and couples earning more than $150,000.

Above that, rebates would be reduced by 5 percent for each $1,000 in income.

Now this "rebate" will not apply to some people who most certainly paid more than $600 in taxes. Apparently, this was an intentional change from the original plan to make the "rebates" more progressive.

In a conference call with Finance Committee members yesterday morning, Chairman Max Baucus (D-Mont.) said he hopes to provide checks to low-income retirees, who are left out of the House plan because they cannot show $3,000 in earned income.

Baucus is arguing that retirees who earn less than $3,000 (that is, those mostly living on Social Security, which is not counted when measuring earnings) should still be entitled to a "rebate" of some sort. Is anyone confused on what this stimulus package actually is?

[Senator Susan] Collins said she will push to restore about $12.5 billion in unemployment benefits and $5 billion in food-stamp extensions that House negotiators also eliminated, a call echoed by her fellow Maine Republican, Sen. Olympia J. Snowe, who vowed to add funds next week in the Finance Committee.

Rebates to people who didn't actually pay the rebated amount in taxes, reduced rebates for high-income households, extra money for people with children, payments to the elderly, unemployment benefits, and food-stamp extensions--I believe that's called "welfare." However, in the three linked articles, the word "welfare" is only used once.

Pelosi, usually a fierce advocate of social welfare programs such as food stamps, pleaded with critics in a speech to the National Press Clube to "think anew and in a bigger way."

So Pelosi is usually a fierce advocate of social welfare programs, but not this time. This isn't welfare, it's a rebate to taxpayers! Yay doublespeak!

The original plan was far from perfect. The amounts rebated were too small to really affect the economy, and there was no corresponding plan for reducing spending. However, it at least was a true rebate since only people paying above a certain amount in taxes would get any money. Now, it's laden with payments to all kinds of people even if they don't pay much in taxes, and those who do pay large amounts of taxes are getting a reduced rebate. Before it reaches Bush's desk, it will probably even contain unemployment benefits, food-stamp increases, and payments to senior citizens. If nothing else, this rebate plan is legislative sausage-making at its finest.


At 4:52 PM, January 28, 2008 , Blogger D.L. Soucy said...

I believe the correct term is 'redistribution of wealth' isn't it? But then, if they call it that, wouldn't that make it sound like they advocated Socialism?

At 6:23 PM, January 28, 2008 , Blogger Vernunft said...

It's not a stimulus package at all - a prospective cut in the capital gains tax would be a far more effective way to encourage future investment that would increase income, whereas this bizarre "we'll give you your money back" cannot have any effect but (if we're lucky, and we won't be!) to improve low-level spending. Of course, if the economy goes south, people will be more inclined to save than spend, reducing that supposed benefit to nothing as well. Do people not get that a tax cut with future effect is the best thing to stimulate growth? People considering what to do in the future can plan around that future tax, doing things now that they know won't be taxed much then, making them happy as anything to spend. As it is, people who have none or virtually no investment income will have a small amount of money, looking to a future with recession on the horizon, and the natural thing to do will be to hold onto that money.

Whatever happens, it'll probably have a small effect - but I bet the effect will be to make the economy slightly worse, not slightly better.

Look forward to news fluff pieces on "What are you going to do with your rebate?" Me? I'll get a few hundred dollars less in loans next year - but I'm sure my story isn't sufficiently sexy to make the news.


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