Friday, January 18, 2008

Sorry I Won’t Stimulate the Economy

President Bush is proposing a $800 per person tax rebate to stimulate the economy. The idea is that by giving people $800 they will go out and spend it, thus helping the economy overcome the likely impending recession. This article in Salon provides a good overview of what happened the last time the government did this in 2001, with $300 rebate checks.

The Salon article details research where economists have shown that the money in 2001was spent by the poor and middle class, but not by the wealthy. This would suggest to get the most bang for the buck in terms of a stimulus we should aim the rebate at people who are less wealthy. Another good possible outcome is that people might use that money to pay back debt, given the state of the mortgage and banking industry this may help the stock market recover.

If I get a rebate check I will probably split it among giving to charity, saving it for a house I’ll buy in a few years and my IRA. Don’t tell President Bush though, I still want the money.

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