by A. M. Gilbert

Created on: March 16, 2008

With the passage of the Economic Stimulus Act of 2008, one could hope that any possible recession in the United States would be avoided. The plan is basically to give those who filed a 2007 tax return a bonus rebate which should then be put back into the economy. The boost provided by the exchange of money is expected to give the economy the push it needs to recover from its current slower state. However, the plan to give Americans money to save the economy will not work for two reasons: the people simply will not funnel the rebates back into the economy and the government's approach to this plan stops it from being viable.

First, the people simply will not take extra income and buy something new. The chief economist for "Standard and Poor's" estimates that about only half of the approximate $120 billion being mailed out to tax payers will actually be put back into the economy. Most people will probably try to pay off bills and debts. Now, with a return of $300-$600 per unmarried person with a taxable annual income of less than $75,000, $600-$1200 for married couples filing jointly with a taxable annual income of less than $150,000, and a $300 bonus per child, families will most likely either opt to save the money or to use it to get out of debt. The Economic Stimulus Act and those who support it are encouraging fiscal irresponsibility among citizens. People will not choose to make purchases instead of saving up to put their children through college or paying off credit card bills. And giving out this money simply worsens the problem. We are entering a recession because people are holding on to their money. And why are people holding on to their money? Because we are entering a recession. Due to this cycle, we cannot expect our economy to be improved by more governmental handouts.

Second, the approach to the plan was ridiculous. Lawmakers jumped the gun with this legislation, waiting only one quarter instead of the required two to decide that we are entering a recession. They are also spending $156 billion over the next ten years to fund this plan, though the actual stimulus generated will likely be less than the value of the package. But has the government made significant budget cuts to fund this plan? No. Money is being pulled from thin air and given to citizens, which, if anything, furthers a possible descent into a recession.

For these reasons, using tax rebates as economic stimulus simply will not work.

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