Remember those “rebate” checks Uncle Sugar sent out earlier this year? They failed to achieve a “stimulus.”
The evidence is now in and that optimism was unwarranted. Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity.
These conclusions are significant for evaluating the likely impact of Barack Obama’s recent proposal to distribute $1,000 rebate checks to low- and middle-income workers at an estimated cost of approximately $65 billion. His plan, to finance those rebates with an extra tax on oil companies, would reduce investment in refining and exploration, keeping oil prices higher than they would otherwise be.
I fail to see how giving me back some money that you’re just going to steal again from my next paycheck is going to solve 50 years of rampantly irresponsible entitlement programs and the deleterious effect said programs have had on the American public, which is now, by and large, a bunch of whiners and gimme, gimme sycophants who vote for whichever stinking rotten liar promises the most free stuff.
The poor effects of the Bush tax rebate as fiscal stimulus, however, let Feldstein now attack the Obama plan for a $1000 tax rebate. Nothing wrong with that – McCain has nothing better however – but what Feldstein doesn’t say is that if you follow the logic of his two op-eds (and this is not something I would necessarily buy into) the conclusion should actually be that fiscal stimulus would work better if it ran through government spending.
Government will always do the most expensive and least efficient possible job of managing any given problem. Government has no motivation to solve any given problem because if it did, then it would have to shrink itself. How many bureaucrats do you know who would be willing to eliminate their own job?