I had just tripped over my kitchen floor again when I
heard the government wanted to give me an $800 tax rebate.
My first thought was maybe I can use it to replace the ancient vinyl
with the holes that my toes get caught in. My second thought: Where is
my government going to get the money for my rebate?
I didn't study economics in college. The books I've read on the subject
have mostly contradicted each other. Until I "get" what the government
financial geniuses seem to know, I live by the principles my father
1.) Don't spend what you don't have;
2.) Save; and
3.) Borrow only for major expenditures if you are reasonably sure
you'll have enough money to pay back the loan with interest.
I do know enough to answer my own question about the tax rebate. The
money will come from taxpayers like me, or from whoever loans my country
the money, which will add to the national debt that my grandchildren
Fortunately I didn't rush to order the kitchen floor, since the proposed
amount for single filers like me dropped to $600 in the House bill. But
if the economy is so bad that the government wants to increase the
national debt for a "stimulus package," maybe I can get a good deal on
So where did my other $200 go?: In the final House "compromise" it goes
to low-income people who don't pay taxes.
Then how can the government call it a rebate, which Webster's defines as
"a return of part of an amount paid, as for goods or services"? If you
don't pay in the first place, how can you get money back?
Has it occurred to the financial geniuses that the government might be
taking too much from us taxpayers in the first place, thereby causing
the recession that they think can be prevented by giving us some of our
own money back?
So how does that work again?
Let's see: I buy a new floor, the floor company grows and creates new
jobs ... or does it just not lay off an employee because business is
Which takes us to a Senate version of the "economic stimulus bill,"
which increases unemployment benefits and food stamps - just in case the
floor-buying thing doesn't work like it's supposed to.
But wait, the Senate also wants to give the "rebate" to people on Social
Security, which I am about to start collecting. So will I get a double
dip in the rebate pool? Maybe I can refinish my battered wooden bedroom
floor too! Wow, am I growing the economy or what!
But speaking of Social Security, isn't it going to run out of money
before our kids - the same ones we expect to deal with the accelerating
national debt - can collect? I'd better save my rebate for my
grandchildren, to help them buy food.
What is this "grow the economy" thing anyhow? Where are we growing to?
What should people who are not tripping over their kitchen floor spend
their rebate on - something they don't need?
Some economists say we should save more, but others say that would be a
bad use of the "rebate" because it's meant for economic stimulus.
Well, savings are used for loans, some of which can go to home mortgages
or start-up businesses, right? But careful, isn't this recession partly
due to lenders who gave money to too many potential deadbeats, and then
sold the mortgages to China - whose own businesses are competing with
Maybe if I'd taken Economics 101 at Penn State this would all make
sense. But maybe not. Using just my dad's principles, I seem to have
come to the same conclusion as the National Taxpayers Union, which sent
a letter to Congress about the "stimulus plan":
"It is becoming clearer that it would favor wealth redistribution over
true economic expansion. ... Even those who had no income tax burden
will be eligible for checks worth $300, provided they earned more than
$3,000 in 2007. These tax rebates don't create any new wealth, they
simply redistribute resources that the Treasury extracted from others.
"In addition, the plan will increase the limits for loans purchased or
insured by the Federal Housing Administration as well as Fannie Mae and
Freddie Mac. ... This expansion of federally sponsored mortgage debt is
but a continuation of risky lending practices, backed implicitly by the
American taxpayer. ... many businesses will shift their future
investments up to 2008, potentially leading to a slowdown of investments
in 2009. Consistent and stable business expansion requires long-term
policies, not temporary changes.
"Despite claims by its proponents, this plan will not lead to the kind
of economic stimulus that has been advertised. Congress has no mechanism
for 'creating' additional wealth in America over the short term, as
1970s experiments in tax rebates and spending increases proved. This
plan amounts to taking a bucket of water from the deep end of the pool
and pouring it in the shallow end; the result yields neither new water
nor a larger pool."
Maybe I'll just get some linoleum samples and nail them over the holes
in my floor.
Barbara Anderson is executive director of Citizens
for Limited Taxation. Her column appears weekly in the Salem News and
Eagle Tribune, and often in the Newburyport Times, Gloucester Times, and
Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in the
Providence (RI) Journal and other newspapers.