Friday, January 25, 2008

Stimulus Package - Handout or Help?

The President and Congress believe that providing rebate checks to 117 million families, and $50 billion in incentives to businesses will prevent our economy from going into a recession. In an election year, there is bi-partisan agreement on both sides of the political aisle that it is a handout that Americans need, and a handout they shall have. A handout?

Yes, a handout. In my mind, a rebate conveys that the receiver of the money did something productive as a result, and for this, the taxpayer will be rewarded. But in this case, the taxpayer did nothing except noddingly approve that perhaps it would be a nice idea to receive a check either in May or August for $600.

What will the taxpayer do with this money? Invest (too small), buy stuff, or pay off debts? Smart money people say that the average American owes almost $10,000 in credit card debt, and should pay off as much as this balance as the person can to avoid as much of the $1,400 a year in interest that he pays for carrying the debt. Obviously, our politicians want the taxpayer to go out and buy a new computer or couch, and to continue to live beyond this means, including carrying this ridiculous interest payment every month.

So the Chinese ought to really be loving the thinking of our politicians - giving every family a check to buy Chinese goods that we can't afford to buy, and as a result, have to borrow from the Chinese in order to live beyond our collective means. Great thinking by our policymakers.

Anybody ever thought of focusing to improve our declining productivity that really impacts our economy? Improving productivity can actually move more money into our economy through true productivity and job growth - but in comparison to other world economies. Stimuli packages that simply move money from one U.S. pocket to another doesn't do this.

It's time for clear thinking and a focus on productivity in the United States - no more gimmicks and election year gamesmanship.

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