Tax Rebates are Good, But Permanant Tax Cuts are Better

Human Events | Mark Skousen | Jan. 22, 2008

Anytime the government gives money back to the people, it’s a good thing, so I have no qualms about President Bush’s tax rebate of $800 per taxpayer, or $1,600 per couple. He ought to recommend it every year, not just when a recession threatens.

Bush did the same thing in 2001 only on a smaller scale: $300 per person, or $600 per couple. It did a lot of good to encourage a recovery in the economy, precisely because most people paid off consumer debt or saved/invested in the tax rebate. Those pundits on CNBC (and even President Bush) who said that if consumers don’t spend the money, the rebates would do no good, were proven wrong. The US economy started recovering right after the rebates went into effect. As I wrote recently in the Wall Street Journal, and the Christian Science Monitor, the economy is driven by supply-side saving and investment, not consumer spending. Consumer spending is the effect, not the cause, of prosperity.

Of course, I (and Wall Street) would prefer that President Bush take advantage of this dire economic situation to push for permanent extention of the 2001 Bush tax package instead of a stopgap measure. But this isn’t the first time this administration has disappointed free-market conservatives.

On the spending side, expanding the food stamp program and unemployment insurance can only make the recession or slowdown last longer! Studies show that unemployment insurance prolongs the unemployment lines. The unemployed don’t start seriously looking for new work until the benefits end.

. . . more

Comments

  1. Aletheameter says:

    Tax rebates are to economic growth, what candy is to physical fitness: something that provides a small short term boost, but does nothing to promote the long-term health of the economy and may even be damaging.

    If we want to promote the long-term health of the economy than we have to invest as a nation in areas that will make us more economically competitive in the global marketplace. The United States will be more economically competitive if it has an educated, healthy and productive workforce, a supportive physical infrastructure, and a program of investments in research and development to keep US business ahead of its competitors in emerging technologies. The United States will also be more economically competitive if it reduces its national debt and increases national savings.

    The tax rebate plans do none of these things. The rebates increase the deficit and national debt, without purchasing anything of equal or lasting value. The rebate checks given to US consumers will be spent on Arab oil and Chinese manufactured goods, and that will be it. The US wage-earner is falling behind because the nation as a whole is failing to maintain its competitive advantage over its foreign commercial rivals.

  2. Dean Scourtes speaks like a true leftist: “People keeping more of their hard-earned money = bad, goverment taxing and spending more = good. It’s always bad to trust the people to act, it’s always the gov’t job to do everything for us.”

    That is always Dean’s answer to everything: gov’t, gov’t, gov’t, but only when it’s run by liberal-Democrats or radical-leftists. Republicans and conservatives in gov’t do not qualify. In the fantasy world that Dean lives in, it’s not private enterprise that creates value and makes America the economic powerhouse it is, but the gov’t.

    Thanks, yet again Dean, for showing us the intellectual bankruptcy of the left. Fr. Hans was right, it’s fun to occasionally approve your posts to have a good laugh and a great opportunity to showcase and expose the failures of leftist ideologies. Great stuff!

    PS – It’s not tax cuts that cause deficits, but gov’t OVERSPENDING that does that. If you want to eliminate the debt and help the economy and the country, please spend your energies talking to the socialists and communists in Congress (from both parties) to start treating OUR taxes as if it was their money not a bottomless well of cash to spend as they please.

  3. Michael Bauman says:

    The politicians are doing exactly what we want them to do, spend $$$$. That’s how they get elected. It won’t change until we stop requesting and demanding government services and stop voting for those who approve government services that we don’t want. We won’t do that, of course, because it is always the services that someone else wants of which we disapprove.

  4. Aletheameter says:

    Chris – If you owned a business would you put every penny of profit into your pocket, or would you invest some of your profits back into your company to make it more efficient and expand its sales? What would you say to a boss who refused to fix broken equipment in his plant, or train his workers properly, because, as he said “it’s my money”?

    Why can’t we as a nation invest in our own future? Why can’t we invest in education and infrastructure to make ourselves a more attractive location for business and commerce?

    The free market exists to satisfy private goals, not to address public needs. That is why private companies have no difficulty closing factories and service centers in the United States and laying off American workers, if they can make more money outsourcing that work to China or India.

    Private companies are going to look out for their shareholders, not the American middle-class. We need the US government to look out for American middle class. A tax cut for an unemployed person, who isn’t paying much taxes to begin with, is really no help at all. Job creating public works programs, college tuition asistance and universal health care are what the American middle-class needs to advance economically and become more financially secure.

  5. Dean, according to you “all of America” is narrowed down to the 3-4% who are on unemployment? Instead of focusing in on the 95-96% of the country, you criticize a tax cut to those that pay the taxes because someone who is unemployed won’t get as large a refund. BTW, anyone who’s unemployed and paid taxes will in fact receive their own taxes back, so you’re argument is flawed.

    You continue to go off topic by claiming that: “Why can’t we as a nation invest in our own future? Why can’t we invest in education and infrastructure to make ourselves a more attractive location for business and commerce?” What? Where have you been Dean? Public Education spending has grown faster than the rate of inflation for many years under Bush reaching $90 billion in 2007. Also, federal spending for Transportation, Science/Technology, Natural Resources, and Energy reached $158.5 billion, that’s excluding the billions of dollars the states themselves spend on their transportation and infrastructure projects, and public education systems (California alone spends 42% of its state revenues on Public Education, about $41 billion). And somehow that’s still not enough for you!

    Federal Budget 2007
    ==================================
    $89.9 billion (+1.3%) – Education and training
    $76.9 billion (+8.1%) – Transportation
    $25.0 billion (+4.0%) – Science and technology
    $23.5 billion (+0.0%) – Energy
    $33.1 billion (+5.7%) – Natural resources and environment

    Dean, from your point of view when will enough be enough regarding taxation and spending by the gov’t? Oh wait, I already know the answer to that. NEVER! We should just give it all to the gov’t and let them distribute it on our behalf based on the whim of a handful of career politicians in Washington. In other words you will only be happy when we live under COMMUNISM.