Recession: Stimulus Package Risks
Congress and the President are working on a multi-billion-dollar ($140 billion plus) “stimulus package” in an effort to ward off a recession. One proposal that has gained ground is the idea of giving individuals an $800 tax rebate, and married couples $1600.
Steve Chapman points out that similar rebates haven’t done much good in the past, in an column entitled “We’re From the Government and We’re Here to Help.” Such universal rebates increased the deficit, without generating much economic activity.
In The Washington Post, a columnist points out that such “stimulus” packages are often misfocused, since they are designed by the very politicians who missed repeated warning signs of a recession; and even if not misfocused, often are implemented too late, after a recession has already ended and recovery is already underway, resulting in inflationary pressures rather than ending a recession. (Universal, $800 rebates might also, under some circumstances, aggravate trade deficits by promoting increased consumer spending, including spending on imported goods, spending not matched by any increase in wages).
Radio broadcaster Mark Carbonaro suggests that rather than giving an $800 rebate to all taxpayers, even if they already pay little or no taxes, it would make more sense to temporarily cut the federal payroll tax on employers and employees, to encourage employers to hire (or not lay off) employees, and put more money into the pockets of working people. A payroll tax cut on employers, he argues, would help create new investment and job growth that will help stave off a recession, without some of the inflationary pressures that might result from rebates.