by Jack Lee
I know this is ancient history to some, but does anyone recall that tax rebate stimulus plan from 08? Ever wonder how it worked out, aside from the obvious, that we’re deeper in recession than before the stimulus? Well, the numbers are out there and here’s what I found:
It began with an optimistic and influential study by economists at the Brookings Institution that projected each dollar of revenue loss would increase real GDP by more than a dollar if households spent at least 50 cents of every rebate dollar. And this is how it was sold to the taxpayers.
Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity.
Another stimulus plan way back in 1931 promised to end the depression and this was President Roosevelt’s New Deal . A long 9 years later we were still in the depression, but we had made great progression moving toward socialism! It took WWII to finally bring us out of depression.
The worst years of the New Deal came late in 1937 and 1938. The Fed increased reserve requirements for banks, thereby curbing lending and moving the economy back to dangerous deflationary pressures. Roosevelt’s policies were all over the economic map, the New Deal Plan was almost unrecognizable from it’s original form. Some policies worked and some didn’t, yet he was credited for saving us from the Great Depression, a title that was not exactly earned.
Bailouts have the effect of rewarding failure while punishing success.
There’s nothing new in government, and there’s at least a dozen examples of everything thing we’ve ever done in the past that we might be thinking about doing now. Yet, for some unexplainable reason, we rarely look at history to see how it worked before! If it’s never worked before and yet we keep repeating it hoping that eventually we’ll get different results, well, that’s just kinda crazy.
Speaking of crazy, among the “pork” in this new trillion dollar stimulus bill is $335 million for STD’s. One wonders how the STD medical project funding or the $50 million for the National Endowment of the Arts will help stimulate the economy. Almost a billion will go to preparing for a flu pandemic which may or may not happen. Less than 3% of this porky package will go to rebuilding infrastructure like highways and bridges in decay, something that would actually be useful to us.
Is it any wonder that not a single Republican voted for this bill?
I hope you will read Tina’s story, Purpose of Stimulus is Pork – Republicans Decline, it dovetails perfectly with this one.
Note: Fannie and Freddie bailout cost you $238 billion and to put that in perspective, $238 billion is more than the entire federal budget deficit in fiscal 2007.