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Stimulus Plan Summary
Topic Started: Jan 25 2008, 11:50 AM (430 Views)
Dandandat
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Time to put something here
Quote:
 
Stimulus Plan Summary
By Matthew Bandyk
Posted January 24, 2008


The Bush administration and House leaders today announced an economic stimulus package estimated at $150 billion. It still must receive House and Senate approval and be signed into law by President Bush. It has two main components:

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Tax rebates. The biggest component is made up of tax rebates to Americans who earned at least $3,000 in 2007. Individuals who pay federal income taxes would receive $600 checks in the mail, and married couples who file jointly would receive $1,200. Those who do not pay any federal income taxes but make more than $3,000 would receive $300 for individuals and $600 for couples.

When would Americans actually see this money? Treasury Secretary Henry Paulson said that the government could begin making payments "within roughly 60 days of enactment" and be "done in something under 10 weeks." The Associated Press reports that rebates could be in the mail in June, but Bernard Baumohl of the Economic Outlook Group predicted that July or August is more likely due to delays with the Internal Revenue Service. "It's not like the IRS has little else to do this time of year," he said, alluding to the need to process millions of income tax refunds.

Incentives for business. The second component is about $50 billion in tax incentives aimed at encouraging businesses to invest. These provisions would include a 50 percent write-off of capital equipment purchased this year and a $200,000 deduction for equipment purchased by small businesses. Baumohl was skeptical of these provisions, saying "business leaders are being understandably cautious, holding back major spending projects until they get a clearer idea of where the economy is headed."

Still up for debate. Conspicuously missing from the package was a proposal pushed by Democrats to increase unemployment benefits. That omission may be a point of contention with some in Congress. On whether or not new provisions will be added, Paulson said, "The American people are not going to have a lot of patience for taking time. We owe the American people speed, and we owe them a policy that's going to work." He said he was open to the Senate's involvement in shaping the package but added: "I think what we've got is great."


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Dandandat
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Time to put something here
I don't think this is a good idea at all. They are going to borrow the money to give it out, so now every one of the people who will get a check (me included) will be taking a loan the whole county will have to pay back pulse interest in the future.

I would be especially pissed off if I was someone who wouldn’t be getting the rebate.


Oh and I will be saving the money when and if I get it, which only proves this plan wont be as effective as they think it will be.
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RTW
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Vice Admiral
Agreed.

It's short-sighted.
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STC
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Commodore
What do those of you who oppose this see as an alternative?

If (and I accept its a big 'if') the U.S. economy is headed towards recession, surely some kind of fiscal stimulus is needed in order to prevent this?

Yes, you'll have to borrow in order to fund the fiscal stimulus. But if you don't stop the economy sliding into recession, the fall in tax revenues resulting from business failures and job losses will be great, likely leading to even more government borrowing than is the case for the measures proposed here.
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Hoss
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Don't make me use my bare hands on you.
I don't want this until they show me the spending cuts.
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STC
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Commodore
Thing is if you cut government spending in line with the tax rebate (i.e, balancing the budget), the net-effect on Aggregate Demand in the economy will be zero, hence there will not be a reduction in the likelihood of the economy sliding into recession.
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Hoss
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Don't make me use my bare hands on you.
government doesn't create wealth, they only redistribute it. Keeping more money in the private sector and reducing the money in the government can result in a growing economy because the private sector grows the economy where the government just brings it down.
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ImpulseEngine
Admiral
Is this rebate supposed to be the same type of thing as we had in (I think) 2001? If so, this (the rebate part) is just an early advancement of part of your tax refund. Big deal. First off, that just means we will spend less when refund time rolls around (I'm assuming that would be next year, not this one). So let's hope the economy isn't in need of a jump start then. Second, many people won't understand that this isn't "free" money (as happened last time) and may spend it when they wouldn't have done so if they understood it was really part of their future tax refund. Third, what if you're not getting a refund at all? Does that mean you would owe the money back? I'd really be ticked if that's the case and I was one of those people (but I won't be :)).
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ds9074
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Admiral
It was reported that the Governor of the Bank of England had suggested that an economic slowdown might actually be necessary and that agressive measure to avoid it may do more harm in the long run. He therefore is reported to oppose slashing UK interest rates in the way the Federal Reserve has done in the US.

That of course isnt what politicians want to hear. By and large they are more interested in short term election cycles and keeping the economy expanding.

Is it really the best interests of America to increase government debt to give a short term boost to the economy? I doubt it.

I remember something I read ages ago about debt 'More consumption now = less consumption later'.
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STC
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Commodore
38957
 
government doesn't create wealth, they only redistribute it. Keeping more money in the private sector and reducing the money in the government can result in a growing economy because the private sector grows the economy where the government just brings it down.


That is not a universal truth. A simple comparison of countries GDP per capita with the level of output produced by government does not suggest such a correlation. The Scandinavian countries have bigger government involvement but are very affluent.

ds9074
 
It was reported that the Governor of the Bank of England had suggested that an economic slowdown might actually be necessary and that agressive measure to avoid it may do more harm in the long run. He therefore is reported to oppose slashing UK interest rates in the way the Federal Reserve has done in the US.

That of course isnt what politicians want to hear. By and large they are more interested in short term election cycles and keeping the economy expanding.

Is it really the best interests of America to increase government debt to give a short term boost to the economy? I doubt it.

I remember something I read ages ago about debt 'More consumption now = less consumption later'.


If we are just talking about a slowdown rather than a recession then the BofE governor (Mervyn King) is right as an ill-judged aggressive measure would just create another boom and, in the UK situation, increase the property price bubble, storing up bigger problems for the future.

In the case of the U.S. it depends how likely a recession is without intervention. If we are talking about a recession (-ve GDP growth not a slowdown) then increasing government debt in the short term is arguably justifiable. The alternative is a recession, massive falls in tax receipts, increases in welfare spending, and an even bigger government debt as a consequence.
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Dandandat
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Time to put something here
ImpulseEngine
Jan 25 2008, 01:13 PM
Is this rebate supposed to be the same type of thing as we had in (I think) 2001?  If so, this (the rebate part) is just an early advancement of part of your tax refund.  Big deal.  First off, that just means we will spend less when refund time rolls around (I'm assuming that would be next year, not this one).  So let's hope the economy isn't in need of a jump start then. Second, many people won't understand that this isn't "free" money (as happened last time) and may spend it when they wouldn't have done so if they understood it was really part of their future tax refund.  Third, what if you're not getting a refund at all?  Does that mean you would owe the money back?  I'd really be ticked if that's the case and I was one of those people (but I won't be :)).

No, its not like 2003, its free and clear money. They will be borrowing the money and doling it out as stated above. It is not an early refund.

Anyone above the cap will get nothing except the societal obligation to pay back the funds at a later date.
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Minuet
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ImpulseEngine
Jan 25 2008, 01:13 PM
Is this rebate supposed to be the same type of thing as we had in (I think) 2001? If so, this (the rebate part) is just an early advancement of part of your tax refund. Big deal. First off, that just means we will spend less when refund time rolls around (I'm assuming that would be next year, not this one). So let's hope the economy isn't in need of a jump start then. Second, many people won't understand that this isn't "free" money (as happened last time) and may spend it when they wouldn't have done so if they understood it was really part of their future tax refund. Third, what if you're not getting a refund at all? Does that mean you would owe the money back? I'd really be ticked if that's the case and I was one of those people (but I won't be :)).

2003 - We got the rebate the year we lived in Houston. It was on 2002 taxes as I recall and not an advance.
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Dandandat
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Time to put something here
Minuet
Jan 25 2008, 02:41 PM
ImpulseEngine
Jan 25 2008, 01:13 PM
Is this rebate supposed to be the same type of thing as we had in (I think) 2001?  If so, this (the rebate part) is just an early advancement of part of your tax refund.  Big deal.  First off, that just means we will spend less when refund time rolls around (I'm assuming that would be next year, not this one).  So let's hope the economy isn't in need of a jump start then. Second, many people won't understand that this isn't "free" money (as happened last time) and may spend it when they wouldn't have done so if they understood it was really part of their future tax refund.  Third, what if you're not getting a refund at all?  Does that mean you would owe the money back?  I'd really be ticked if that's the case and I was one of those people (but I won't be :)).

2003 - We got the rebate the year we lived in Houston. It was on 2002 taxes as I recall and not an advance.

It was an advance you had to clame it in the next tax year.
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Minuet
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Ok - my memory might be a bit fuzzy. It was a while ago and we actually got the refund while we were in the process of moving back to Canada.
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Admiralbill_gomec
UberAdmiral
Dandandat
Jan 25 2008, 11:53 AM
I don't think this is a good idea at all. They are going to borrow the money to give it out, so now every one of the people who will get a check (me included) will be taking a loan the whole county will have to pay back pulse interest in the future.

I would be especially pissed off if I was someone who wouldn’t be getting the rebate.


Oh and I will be saving the money when and if I get it, which only proves this plan wont be as effective as they think it will be.

I agree. This is not a stimulus at all. More of a "rob Peter to pay Paul." The real kicker? Giving this "stimulus" to people who don't make enough to actually pay taxes.

You want true stimulus? Drop tax rates again. Cut the business tax. Cut the income tax. Cut the capital gains tax.
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