My Non-Expert Opinion on The Stimulus Package
Zack Rosenberg | February 1st, 2009Unlike all the other experts of the Trusted Expert Network, I am not a personal finance, investment, tax, retirement or long term care expert. I am, however, a taxpaying citizen who has thoughts on the economic stimulus package that was just passed by the House and is now moving to the Senate.
It is easy for us as taxpayers to approve of spending that won’t necessarily affect us but our children’s, children. At the same time, it is important for us as a nation to fund the things that will allow that generation to prosper. CNN Money has a great article outlining what is in the stimulus package. From what I can tell, even with all the typical hope for bi-partisanship, the bill is balanced with both spending and tax cuts. What is unclear to me is why tax cuts are perceived as the end all and be all of the package to receive approval.
The independent financial service Moody’s recently released a one page guide that shows the economic boost provided by different parts of the stimulus package (below). It seems that the numbers prove tax cuts create little or no boost to our economy (even more so in the long run). I would argue that it hurts the economy by reducing our ability to generate revenues to repay the $800 plus billion the government plans to issue. Where else are the revenues coming from? The U.S. has reduced our exports to other countries every single year and nothing has yet replaced the country’s ability to generate revenue.
So where does the economic shot in the arm come from? If you look at the chart, the jobless rate of U.S. citizens is round 7.7%. With those numbers expecting to rise and the U.S. economy declining about 4%, clearly something needs to be done. Let us also keep in mind that the U.S. civil engineers have placed a $2 trillion dollar price tag on fixing the infrastructure that keeps the country going. Do you see where I am heading? Yes the idea of tax cuts sound nice, but is $500 over two years to most Americans going to make a difference? No. What will make a difference is jobs. The unfortunate part is that because of politics not enough jobs will be created by the stimulus bill. 40% will go into shovel- ready jobs and that number is only about 20% of the investment we need to improve our infrastructure.
As the non-expert, I am sure there are many things I am missing about the banking system, credit, the housing market, etc. So I am willing to admit my logic might be simplistic. That being said, I think the bill needs to be passed and it needs to be done without the tax cuts. With thinking like that, I should probably avoid politics but the right choice is not always the popular one. Again refer to the chart if you need more reasons why. I am always interested in hearing from you.
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Tags: cnn money, congress, economy, government spending, infrastructure, jobs, moodys, real estate, spending, stimulus, tax cuts, zack rosenberg
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