Stimulus? More Like Wealth Redistribution

In a display of political showmanship and fiscal irresponsibility, congress and the president have agreed to the terms of an economic stimulus package. First, from CNN, the details:

Sources on Capitol Hill and at the Treasury Department said the plan would send checks of $600 to individuals and $1,200 to couples who paid income tax and who filed jointly.

People who did not pay federal income taxes but who had earned income of more than $3,000 would get checks of $300 per individual or $600 per couple.

A Democratic aide and Republican aide said there will be an additional amount per child, which could be in the neighborhood of $300.

Those who earn up to $75,000 individually or up to $150,000 as a couple will be eligible for the payments, said Republican and Democratic sources familiar with the tentative deal.

What we have here is a nice little wealth redistribution plan. If these kinds of tax rebates actually stimulate the economy, then we could debate the appropriateness of excluding wealthier households. But the problem is, rebates don’t work. Historically, people use the rebates to pay down personal debt or they put the money into savings. They don’t put the funds back into the economy. That means, by limiting who gets money from the stimulus package, our government is taking money away from a small group to help a large group pay off their credit cards.

If the point of this legislation is to infuse the economy with money, what does it matter how much you make? Are people who make over $75,000 a year less likely to spend a rebate? Certainly not. Would giving a rebate to these households (they make up just 5% of U.S. households) significantly increase the expense? No. But these people are “rich” or at least “not poor” so I suppose it would be unseemly for the government to be padding their wallets.

And yet, $300 checks are going out to those who pay no taxes at all. On one end of the income scale we have a full-on handout and on the other end we have what amounts to a tax penalty. All I can figure is that President Bush was so desperate to get this showpiece of a bill passed that he let the Democrats dictate the terms. And Democrats are too often more interested in symbolic shows of supporting the less fortunate (and marginalizing the well off) than they are in making substantive reforms.

Of course, I’m not turning down my check. It’ll help pay off some debt. That will help my finances but not the economy.