Re: Economic Stimulus Package
[quote=88Mariner;564514]When the government has gone so far as to damage the economy, the clear response would be to eliminate thier hold on regulating the market.[/quote]
Well, first of all, I'm not sure what exactly you mean as to how the government has "damaged" the economy...if you're talking about the current mess we're in, I'd say that you should look to the private sector for a lot of that responsibility; the government did not force banks to securitize mortgages (many of them apparently sub-prime) and pass them on to investors as investment grade.
[quote=88Mariner;564514]Tax rebates fail because they do not encourage productivity or wealth creation. To receive a rebate, nobody has to work, save, invest, or create any new wealth. Every dollar that government rebates "inject" into the economy must first be taxed or borrowed [I]out[/I] of the economy. No new spending power is created. It is merely redistributed from one group of people to another.[/quote]
I'm sorry, but I can't resist. I'm not saying this from a mean standpoint, but I have to respectfully disagree with you on the fiscal policy, and I suspect that the majority of economics/business experts from John Maynard Keynes onward would as well. To say that tax rebates have no influence across the boards on productivity, wealth creation, and spending power is patently false (take any corporate finance valuation class, and you'll very quickly learn the impact of taxes and tax shields in your NPV calculations). The point of fiscal policy is [I]not[/I], as you suggest, the "benefit" that supposedly occurred when people got the tax refund for free; the point of fiscal policy is the benefit of [I]what will happen[/I] once people have the cash and put some of the capital to work. In other words, fiscal policy is about [I]augmenting the money supply[/I] in the economy and thereby [I]stimulating[/I] the process of wealth creation.
When you reduce the effective tax variable [I]relative to its past point[/I], you are effectively putting [I]more money into circulation[/I] then would have been the case otherwise (all else being equal). When you change money supply, you're actually potentially changing [I]a lot[/I] from a macroeconomic standpoint; you're impacting future inflation rates, employment levels, and investment/saving/consumption trends. Under typical circumstances, consumers, investors, and businesses will put some of that "new" capital to work; they will invest or spend some portion of it and thereby do all of the things that you say can't be done - create wealth, spur productivity, augment spending. Moreover, when they do this there is a [I]multiplier effect[/I] that comes into play (the dollar you spend is someone else's income; they turn around and spend some of that dollar...) that ultimately makes the impact to be many times the magnitude of the original face value of the tax breaks.
Does this mean that we can do all this and avoid a recession? Not necessarily at all. Fiscal policy is no "silver bullet" to our problems; it has its own drawbacks and limitations contingent on a whole lot of other variables in the current economic environment. My point is simply that, overall, the theory is not as nutty as it sounds and it can have a real impact on us.