by Will Emprise

Created on: February 18, 2008

Tax rebates have traditionally worked every time they have been issued, just to what extent, and how fast.

This is a complicated subject matter, and first, there is a need to understand what tax rebates are trying to correct, what goes on during a recession, and how a nation comes out of a recession.

First of all, over-production produces too much of momentarily unneeded things and no one willing to purchase them at the moment. Thus, too many tires, too many tables, too many cabinets may have been produced, consumers may not want them yet and thus these items sit dormant on shelves or in factories. Those that produced them or are in the business of continually producing such items are laid off because their employers have not enough demand to keep them employed. Once these workers are unemployed, they restrict their spending, which means they buy less televisions, cell phones, cars, and even homes. Of course, the cycle then continues the television workers, cell-phone producers, car factory workers, and real estate agents become more and more unemployed. Once this second wave of people becomes unemployed they also start to restrict their spending; they drive less, don't go to movies, don't go to restaurant. Soon waiters and waitresses can't survive on their tips and they become unemployed, the can't pay their car insurance, they can't afford their rent. They spend less on even more items and services, such as food, drinks, heating, and clothing. Thus even more restaurant employees, more bars, more clothing stores begin to lay people off. Obviously this is an endless cycle and during the great depression one in three of all workers experienced this down turn problem.

The remedy proposed by John Maynard Keynes was for the government to spend, not save. Traditionally, before 1930, the United States would espouse a restrictive spending policy in a downturn economy and would act the same way that an individual would: save money, don't spend, and wait until the end of the recession. This is of course what Keynes claimed was the wrong thing to do. In his book, John Maynard Keynes constructed a string of equations to model the US economy. These equations expressed that for an economy to com out of a recession swiftly its government should SPEND.

Once the government gives money to the people, or purchases things such as military equipment, bridges, roads, or even government buildings, money automatically works its way back to the people. Thus, the bridge builders, the

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