The rebate is nothing but an election year buying of votes. It also serves to give the impression that government is doing something when in fact it's doing the wrong thing:
Mayor Bloomberg wants to hold an intervention for his boozing Uncle Sam.
In an unusually sharp attack on Washington Thursday, Bloomberg compared the federal government's plan to hand out $600 tax rebate checks to "giving a drink to an alcoholic."
"They want to send out a check to everybody to stimulate the economy," Bloomberg said. "I suppose it won't hurt the economy, but it's in many senses like giving a drink to an alcoholic.
"The government's been doing exactly that. It's been spending money it doesn't have."
And it ain't just Bloomberg who has his doubts about how effective the rebate will be in dealing with a long term threat to the economy:
There's a lot of skepticism in the country about how effective the $168 billion fiscal stimulus package will be, but economists who've crunched the numbers say it will give the economy a much-needed boost in the middle of the year.
"It could make the difference between a short and a long recession," said Mark Zandi, chief economist for Moody's Economy.com.
But it won't solve the economy's fundamental problems, he said. That will require policymakers making a serious effort to solve the housing and credit crises.
It is at best a short term boost:
Even as President Bush signed a $168 billion stimulus bill Wednesday, kicking off the process of sending billions of dollars in rebates to American taxpayers, economists predicted the move will provide only a short-term boost for the struggling economy.
[...]The payout, placing some $100 billion mostly in the hands of middle- and lower-income taxpayers, should modestly boost the nation's economy in the second half of the year, economists agree. But it may soften the blow of any recession rather than eliminating it, making it shallower than it might be without the injection of new spending.
[...]The president sought this relief as a shot in the arm for an economy which he maintains is going through a "rough patch." The White House, while acknowledging that growth is slowing, does not concede that a recession is coming, though the Bush administration is projecting near-record federal budget deficits this year and next, with the new rebates adding to that deficit.
[...]The minimum payments will be $300 for an individual and $600 for a couple filing a joint tax return. Based on the amount of taxes that people pay, rebates will be as much as $600 for individuals and $1,200 for couples. In addition, checks will include $300 for each child in a family eligible for tax credits.
A sliding income scale is designed to send the most money to lower- and middle-income taxpayers, with the nonpartisan Center on Budget and Policy Priorities reporting that a couple with two children with an income of $35,000 a year will see a tax rebate of $1,800 – the maximum for a couple with money added for the children.
And because that money will be delivered to people most likely to spend it, rather than save or invest it, economists agree that it should have the intended effect of pumping billions of dollars into an ailing economy.
[...]"At the same time, I don't know much long-term effect this will have," said Sohn, who is among those who believe a recession already is under way. "I think this recession will turn out to be longer than people realize… I think there will be a recession, and I think it will go beyond 2008."
He added, "The problems we are facing – a housing shortage and credit crunch – they are not simply going to go away because of these stimulus rebates."
Kent Hughes, an economist at the Woodrow Wilson Institute in Washington, pegs the impact of the new spending at a boost of one-half percentage point in the GDP. "I think there is a modest positive impact" on the economy, Hughes said.
But "this whole package would have worked better if it were part of a long-term package," he said, suggesting that a new commitment to rebuilding the nation's infrastructure or an Apollo moon program for energy independence would offer longer-range hope for the economy.
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