Tax Rebate Smoke and Mirrors to Stimulate the Economy
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Quite plainly, this upcoming "tax rebate" is nothing of the sort. Since the government is already spending more than it receives in tax revenue this so called rebate is simply a loan. The government borrowed an additional $150 billion and is giving it to American taxpayers as a gift to try to get them to spend it for the benefit of the economy. It has nothing to do with taxes (except that you have to have filed a tax return to get it).
If Democrats had posed the legislation as it truly is they'd get absolutely hammered. "We're going to borrow some money to give to Americans." This sounds like a welfare state gone mad. By calling this absurdity a "Tax Rebate" conservatives and Republicans become supporters and demonstrate either a lack of understanding what conservative economics are or a lack of conviction to their own principles. What the Republican leadership is doing is good "old fashioned" liberal economics - Keynesian Style. They're borrowing money in a time of economic recession in order to put the money into circulation and induce spending.
It should be understood that this is a time-tested economic strategy that has a fair chance of doing what it is intended. However; the question of where they came up with the $150 billion figure is interesting. The entire legislation was passed so quickly it is hard to imagine that true calculations were actually made. Sound economics requires developing sophisticated formulas to determine what level of monetary input is sufficient to get the economy moving without putting too much money into circulation and inducing an increase in inflation. Determining this amount is not easy especially at a time of very low interest rates and rising inflation. The chances of doing more harm to the economy is very real if the calculation are not done properly. Given the limited time and rapid acceptance by both parties it is difficult to believe that this was well thought out.
Oddly enough, the 2001 "tax cut" was exactly the same thing and it demonstrates how little true "conservatives" actually believe in their own economic theories. It is very difficult to find any conservative who didn't then or doesn't now support the 2001 tax cut. We can directly tie the increased government debt to this policy so all that tax cut became was a way to borrow money to hand out to American businesses. It simply transferred goverment income from tax revenues to borrowing. It's the equivalent to a person cutting back on his employment and making up for the lost salary with credit cards. In theory this person could use his extra time to find a new and more lucrative source of income but the economics behind this reasoning are not particularly sound.
In the end Americans will probably do what good "rational actors" should do. They'll happily accept it and spend it. Whether it will have a positive or negative effect on the economy is yet to be seen but it would certainly have a better chance of a positive effect if they'd planned it out a little better. Now it is just a crapshoot and the economists will just hope for the best.
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