Posted on 01/18/2008 7:59:00 PM PST by Aristotelian
With remarkable speed, Congress, the White House, Republicans, Democrats and even the Federal Reserve have come to a consensus on the need for economic stimulus to moderate and perhaps forestall a recession. It seems certain that the final stimulus package will contain a tax rebate.
The underlying theory for the rebate idea traces back to the British economist John Maynard Keynes. He believed that spending was the driving force in the economy. It didn't matter whether the spending was done by businesses on capital equipment, by governments on public works, or by consumers -- spending is spending in the Keynesian model, and all of it is stimulative.
In Keynes' defense, his theory was developed during a severe, world-wide deflation. Spending of all kinds was paralyzed by a lack of liquidity, and the Federal Reserve had difficulty injecting money into the economy because so many banks had closed. Under these circumstances, deficit spending by governments made sense as a means of getting money into circulation and overcoming deflation. The problem is that, once World War II seemed to validate Keynes's theory, the idea of stimulating the economy by increasing government spending became the all-purpose cure for every economic slowdown, regardless of its underlying cause.
In the 1960s and 1970s, this usually took the form of public works spending. But in 1974, the White House was keen on the idea of cutting taxes to stimulate private spending. Since it was feared that a permanent tax cut might be inflationary, President Gerald Ford and the Democratic Congress agreed on a one-shot tax rebate. It was thought that cash-strapped consumers would take their government checks and immediately run out and spend them on food, clothing and other necessities. This would give the economy a Keynesian boost.
(Excerpt) Read more at online.wsj.com ...
I think even the mafia is too honest to try “tax rebates.”
Seems to me Bush and the Dems on the Hill are tripping over each other in trying to be the first to cut billions in rebate checks in an election year. It’ll be like money falling from the sky.
Tax reduction is the only thing that works. Reagan proved this. However, the only way to control America is to increase taxes to the point that we are totally subservient to the government for everything.
Ummmm, my parents spent the rebate in 1975 on groceries. Most of the families we knew did the same.
We spent ours in 2003 on a windshield and a long distance trip for a funeral.
Most of the people we know spent theirs on immediate needs.
Granted it was a drop in the bucket of the economy but I have a tendency to question “authority”. I just can’t help it.
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