The 2008 Economic Stimulus Package
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Looks like the economic stimulation package is going to pass through Congress. So this may leave you with a few questions: 1. How much do I get? and 2. What am I going to spend it on?
I can’t tell you what to spend it on, but if you want to get an idea of how much you might receive I found
The stimulus package does more than rebates.
The Package:
- To address the mortgage crisis, the package raises the limit on Federal Housing Administration loans from $362,000 to as high as $729,750 in expensive areas, allowing more subprime mortgage holders to refinance into federally insured loans.
- For consumers, up to $1,200/family
- The package would allow businesses to immediately write off 50 percent of purchases of plants and other capital equipment and permit small businesses to write off additional purchases of equipment.
Notably Absent:
- No extension of unemployment benefits.
- Removal of ability of businesses incurring losses now to reclaim taxes paid in past years.
There are a few things that concern me. The rebate is slated to be 1% of our GDP. Now I really doubt that it will move the economy much. In fact most of our consumption is on foreign goods. Of course our economy is 60% services so a good chunk would get spent on domestic services. In any case I think it to be inefficient.
Another concern I have is the cost - $100 billion. Putting cash in the hands of consumers is not what I consider a stimulus. It is irresponsible at best. What really stimulates the economy is investment in capital goods. The 50% capital equipment writeoff is a good start, but I think more targeted tax cuts would do a better job then giving away cash to consumers. This is a stop-gap measure that at best will have a very short-term effect of delaying a recession or at best provide a few quarters of flat growth.
3 Comments on this post
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Thiseye said:
Personally, I’ve never liked these types of policies. I always get the impression that they’re developed and supported by politicians who don’t know the first thing about economics but think it’s a good idea because A) it sounds good, and B) it’ll get them votes. As an aside, one of my favorite Bush quotes is: “I think I got a B in Econ 101. I got an A, however, in keeping taxes low…”
The fact that Bernanke is actually supporting this makes me feel a little better about it, but I’m still not sold on this plan nor our Fed chief. Btw, I am getting $600.
January 29th, 2008 at 7:06 pm -
Matt Ellsworth said:
I heard about this the other day and i’m not in anyway in support of it. if they want to stimulate the economy and help out business then why not just send the check to the business? If they want to make sure the money gets spent - send out pre-loaded debit cards not checks. You can’t use those for anything else…
All in all - this is just going to increase our inflation and devalue the dollar even further.
January 30th, 2008 at 10:06 am -
Dax Desai said:
Matt - Amen Brother! I’m fuming thinking about the inflationary effects this is going to stoke. I’m going to post on it, but once I cool down a little. That idea about the debit cards is definitely interesting. Maybe then I’d go buy that Plasma I’ve had my eye on forever, but then that would go 20% to some U.S. distributor and 80% to China. Maybe we should push to heat up the Chinese economy and hope for a spillover effect over here? Now there’s creative capitalism. It is equally irresponsible as what we’re doing right now.
January 30th, 2008 at 10:57 am
