The case for Bailout vs. Hand-out
January 29, 2009
The recently passed piece of legislation in our US House of Representatives for the so called $825 billion dollar economic stimulus is a load of ear-mark spending that will possibly generate 1,000,000 jobs according to reputable economists.
Let's see, that amounts to $825,000 per job created! I don't know about you, but that seems very expensive! If all 143,000,000 workers in America's workforce received a check from Uncle Sam for $5,769, that might actually do some good! We could use that money for real purchases, down payments on cars, paying down some of the $1.5 trillion in consumer credit card debt that is outstanding,making up for the losses of 401k's, or saving your house if you recently lost a job!
Politicians in Washington can spend big money, but they don't know how to earn it, that is left up to us. Since it is our money they are spending, why not let the people that will ultimately be paying it back put it in their pockets?
The middle class tax cut in this legislation amounts to about $500 per person. That is a trivial amount and will not do any real good for consumer confidence, the housing market, or the banking system. It is about 1/10th of what is about to be spent, which we will all have to pay back.
In order to restore some consumer confidence, put the money where individuals can make the best decisions on how to use it to benefit their families. That by definition is how our economy operates and would provide an enormous multiplier effect on the money spent.
Yes something needs to be done, but spending on huge projects that will take years to get going and complete with the government dictating every step of the way will not have the desired effect. Handing out $5,769 checks to 143,000,000 taxpayers might just do the trick!
It is well known that windfalls like this tend to be spent immediately rather than saved. The velocity of money would increase, demands for consumer goods, including durable goods would increase, and the consumer could shake the deflationary mind-set that is creating our downward spiral.
It will not be politically expedient to do this since Washington is more concerned about "fairness" and dividing up a dwindling pie than figuring out ways to make more pie!