Will An Economic Stimulus Package Work?

[2B]

The scary part is that the $145 billion would probably be better spent guaranteeing all of the subprime debts that got us into this mess.

The Fed has been almost totally befuddled by this whole thing. The only thing that has been positive is the fed fund auctions. That has kept banks with enough liquidity to maintain their solvency.

Overall, Greenspan put the rates too low for too long and then raised them too high. He also could have stopped the subprime mess when it was just starting but he cheered it on. Bernacke raised rates when he came in to show he was tough but that just guaranteed the collapse. Now they need to drop rates dramatically to get things going and then raise them slowly back up.

I do think the stock market mania is way over done. Non-financial companies seem to be doing well but punished along with everything else. The S&P fell about 50% during the 2001/2003 fall but earnings had already collapsed. We're almost half way there since Oct 07 and overall S&P earnings are still rising.

 

[barbarus]

Actually there's not much either the Fed or the fed govt. can do to fix things, it just has to work it's way through.

Quite true, but they can make the situation much worse and probably will.

 

[jazz4cash]

I guess I'm shocked at the "free money' comments.

I beleive this will be a tax cut/rebate so while I like the idea of paying less taxes, Im probably just getting my own money back if I even qualify. Since they want this directed at whoever they think will use it to consume more. During Bernanke's testimony, they fretted over how to get money to non-filers (helicopters!) Since they want they money to be used for consumer goods, perhaps they will send Wal-Mart gift cards instead of checks.

 

[Rustic23]

Lots of folks think in terms of 'Free Money' from the government.

 

[jazz4cash]

Lots of folks think in terms of 'Free Money' from the government.

Yeah...but I did expect to find as many on this board.

 

[megacorp-firee]

I also heard the word "workers" in the rebate plan. So us retired folks may be out of luck .

WHAT! Call my lawyer! ...sue ...sue ... class action

 

[dumpster56]

1600, might go towards my trip to the Summer Olympics. In China, go figure.

 

[RetireeRobert]

President Bush and congress are working on an economic stimulus package that could put as much as a $1,600 tax rebate in the hands of a married couple or $800 for a single person. With 70% of our economy dependent upon consumer spending, this could certainly help revive our sputtering economy. Do you agree or disagree?

Agree. I recall tax rebates were used to good effect back in 2000 or 2001 when the recession and tech bubble burst were hurting the economy. 2003 the stock market started going gangbusters along with the revived economy.

 

[hellodeli1]

Will it stimulate the economy?

I read an interesting post on this over at musings on personal finance -- to summarize, Americans have such a poor savings rate, that it's a pretty good bet that that money will go directly into the economy. Now, I'm not sure on a higher level what kind of impact it will make . . .

 

[Arc]

More wealth redistribution anyone? I agree with Unclehoney - let the market forces work!

Note: Comment biased by expectation that I would not be one of the lucky check recipients.

 

[Retire Soon]

I also heard the word "workers" in the rebate plan. So us retired folks may be out of luck .

The "unofficial White House plan" is to suspend the 10% tax code rate, which is the bottom rate that everyone with taxable income actually pays. The intention of the plan is to give a rebate to anyone who pays income taxes, which would include ER's like many of us. It's interesting to note that 57 million Americans pay no federal income taxes at all, and would receive no benefit under the administration's proposal. This group of people includes 30 million low wage earners and the rest mostly retirees. Democrats are pushing to extend the White House plan by including everyone who filed an income tax return, whether or not they actually paid taxes. The bottom line is that President Bush would like to include us ER's who pay income taxes receive the $800/$1600 tax rebate and not just w*rking foks.

Bush, Democrats Spar on Stimulus - WSJ.com

 

[militaryman]

My parents make about 20k from a annuity pension.

After the standard married deduction of 10K(?) and the 2 exemption for self and spouse they have about 3000 of taxable (10% tax bracket) income. So eliminating the 10% tax bracket would result in 300 dollars for them I guess. Which actually would be of some help at their level.

If their annuity was 17k they would be outta luck I suppose.

 

[TromboneAl]

Retailers would be smart to tailor their prices to the rebate. If the rebate is $1,600, price the HDTV to exactly $1,600, and call it the "Free After Rebate" TV.

 

[REWahoo]

Retailers would be smart to tailor their prices to the rebate. If the rebate is $1,600, price the HDTV to exactly $1,600, and call it the "Free After Rebate" TV.

Yep. Might also be a good idea to do a "Cash your rebate check here for free and get XX% off anything in the store" promotion.

 

[Alan]

According to Robert Samuelson, who I read in the Washington Post, it will be too small to have an effect on an economy as big as ours.

I have not linked to this site before but I found the article on the Interweb:
RealClearPolitics - Articles - Stimulus Will Be Unneeded or Too Little

Mike D.

I tend to agree. $100B rebate sounds a lot, but it is a $14T economy. However, politically they always have to do something.

 

[Arc]

More wealth redistribution anyone? I agree with Unclehoney - let the market forces work!

Note: Comment biased by expectation that I would not be one of the lucky check recipients.

I've read Retire Soon's post and have had a change of heart. I can't think of anything better the government can do in this time of crisis than write a check to every American Citizen - and illegal immigrant. The logic is so obvious, I'm embarrassed for making the earlier post.
What are the chances of getting this done before the Superbowl ? - I too am leaning towards a big screen.

 

[utrecht]

Isnt the last tax rebate back in 2001 one of the main reasons that recession was so short?

 

[Retire Soon]

I've read Retire Soon's post and have had a change of heart. I can't think of anything better the government can do in this time of crisis than write a check to every American Citizen - and illegal immigrant. The logic is so obvious, I'm embarrassed for making the earlier post.
What are the chances of getting this done before the Superbowl ? - I too am leaning towards a big screen.

Do illegal immigrants file federal income tax returns?

 

[growing_older]

News reports I saw indicated fastest possible timeline has political agreement by sometime in March and check being sent sometime in June. But any delays could push the delivery of the "stimulus" back to Oct or Nov.

How can this be useful if it won't deliver any stimulus for at least 6 months and maybe more. By then the economy could be in a very different situation.

 

[jazz4cash]

News reports I saw indicated fastest possible timeline has political agreement by sometime in March and check being sent sometime in June. But any delays could push the delivery of the "stimulus" back to Oct or Nov.

How can this be useful if it won't deliver any stimulus for at least 6 months and maybe more. By then the economy could be in a very different situation.

wow....I agree if it takes that long it wont help other than the psychological effect (which has been negative, so far).

 

[Alan]

Do illegal immigrants file federal income tax returns?

Most certainly they do, well many of them do. That is one of the intriguing things. They get a valid tax id, get W-2's and file income taxes each year, but get no credit for SS. One of the proposed law changes was to allow illegal immigrants who finally get legal status to pay a fee of about $5K to allow them to have their back SS payments credited.

We know a couple from Uraguay who have here about 9 years. She works in a child care center (she was a primary school teacher in Uraguay) and he works 2 jobs at restaurants (he did work in the Commerce department in Uraguay). They have a son who is a senior at High School and still own their home back in Uraguay. I think that if you are employed and file taxes every year the government turns a blind, and unlike citizens they pocket both the employer and employee SS contributions.

Very strange, but true

 

[Retire Soon]

Most certainly they do, well many of them do. That is one of the intriguing things. They get a valid tax id, get W-2's and file income taxes each year, but get no credit for SS. One of the proposed law changes was to allow illegal immigrants who finally get legal status to pay a fee of about $5K to allow them to have their back SS payments credited.
We know a couple from Uraguay who have here about 9 years. She works in a child care center (she was a primary school teacher in Uraguay) and he works 2 jobs at restaurants (he did work in the Commerce department in Uraguay). They have a son who is a senior at High School and still own their home back in Uraguay. I think that if you are employed and file taxes every year the government turns a blind, and unlike citizens they pocket both the employer and employee SS contributions.

Very strange, but true

I found this bit of information very interesting. Thanks for bringing me up to date. I had no idea that this was going on.

 

[Alan]

I found this bit of information very interesting. Thanks for bringing me up to date. I had no idea that this was going on.

Try reading these links

Illegal immigrants and Social Security | The San Diego Union-Tribune

http://www.nytimes.com/2005/04/05/business/05immigration.html

We are talking billions of $ that will be paid in by illegals and never paid back to them. (I forgot about medicaid - same thing applies)

 

[Rustic23]

Most certainly they do, well many of them do.

I don't want to hijack this thread, but is that an opinion or have you seen some stats that show 'many do'. My feeling here in Texas is that those that work with forged documents where a business is taking out taxes, is that the taxes are forwarded by the employer but they do not file a tax return. Also, there seems to be 'many' that are day workers and paid cash. Just an observance on my part, I have not seen any stats. So I was wondering if you had a reference.

 

[Alan]

I don't want to hijack this thread, but is that an opinion or have you seen some stats that show 'many do'. My feeling here in Texas is that those that work with forged documents where a business is taking out taxes, is that the taxes are forwarded by the employer but they do not file a tax return. Also, there seems to be 'many' that are day workers and paid cash. Just an observance on my part, I have not seen any stats. So I was wondering if you had a reference.

Apart from my personal, non-statistical personal aquaintances in Texas (I only moved to Louisiana 2 weeks ago) I also heard a radio news story on it a year or back. It was a result of the immigration act of 1986 putting the emphasis on the employer to check for valid status. This meant they had to accept SS cards and put illegals on the payroll. They can then show that they were not breaking the law which only requires a SS card, not passport with visa, or US passport or green card. SS cards are easy to forge.

Taken from the links above:


Here's the drill: People enter the country illegally, promptly procure bogus Social Security cards from the black market, and use them to get jobs. Eventually they get paid, and those earnings generate W-2s that go to the Social Security Administration, which tucks them away in something called the "earnings suspense file." (The government does try to notify some of the larger employers that Social Security cards they've accepted appear to be phony, but that's about the extent of its efforts to figure out where all this money is coming from.) According to the best estimates of the Social Security Administration, the fund has kept track over the last 20 years of more than $300 billion in total earnings – the vast majority of them attributable to illegal immigrants.
Three-hundred billion dollars! You have to admit that's pretty impressive in a country where no one will admit to actually hiring illegal immigrants in the first place. But those are just the figures in a ledger. The hard currency is the Social Security taxes that illegal immigrants and their employers pay on those earnings. That rings in at about $7 billion a year. Which is why you don't hear the Social Security Administration raising a fuss over illegal immigration. And to the degree that this arm of the U.S. government has friends in Congress, it could explain why you don't see many pieces of legislation calling for mass deportations of illegal immigrants. I mean, why kill the golden goose?