The questionable stimulus package
I was at a Credit Union conference last week where the economic news was gloom and doom, which I thought I’d pass along (misery loves company and all). According to a senior economist from the Credit Union National Association, most economists are calling the government’s tax rebate plan, “a questionable stimulus package.” Why? Because, for one thing, it probably will not stimulate the economy. Most American consumers currently have record amounts of debt and little savings. The other bad news: rising unemployment (in March, up to 5.1% from 4.8%), recession (economic growth predicated to slow to .9% this year—well below the long-term sustainable trend growth rate of 3.5%), and inflation (now up to 4.1%). Inflation was under 2% last August, so what’s happening? Our dollars are buying less, the sub-prime mess has crept into other facets of the economy, and housing wealth is disappearing as values sink, so naturally people are going to save and pay down debt with their rebates, which is apparently part of the necessary pain we have to undergo to pay for our free-spending ways. The rebate is actually going to cost about $150 billion because the U.S. Government is doing what consumers are doing—spending more than is earned, much of it borrowed from China. As this economist pointed out, the only economy that will be stimulated by these rebates is China’s. Clearly this package is for political, not economic stimulus. In the meantime, the letter we all got from the IRS informing us that the check is (almost) in the mail, cost taxpayers $42 million!