Economic stimulus misses the point

President George W. Bush’s stimulus package is a failure from the start.

The word “recession” is kryptonite for politicians; they never want to be associated with a slow economy. It is now apparent that our economy is slowing down, and our dedicated politicians in Washington have sprung into action to produce a politically popular deal that will put money back in our pockets.

With a strong sense of urgency, lawmakers are in the process of pushing an economic stimulus package through both houses of Congress. The package is around $150 billion of tax rebates for individuals and tax cuts for businesses. The idea is to send money back to the taxpayers, and the people will then use their new fortunes to inject money back into the economy. It’s a simple and popular idea – who wouldn’t want to get money back from the government? And it’s a safe move from our politicians (many of whom will be looking for re-election this year). It’s also a foolish way to try and save our floundering economy.

The whole premise of the tax rebate method relies on consumers to spend their rebate money, but there is no guarantee that individuals will rush to their nearest retailer. As economic conditions worsen, some will exhibit the type of fiscal responsibility that is lacking in Washington, and they will save their money. Even if every dime is spent, there is no guarantee that it will reverse our economic trend.

If our politicians truly believe that increasing government spending is the best option, then we would be better served with direct investments in public works projects. Needed investments in infrastructure would create jobs and infuse money more directly into the economy.

Of more concern is a recent report that the U.S. budget deficit is expected to reach $219 billion this year (up from $163 billion last year). It will be even larger once the stimulus package goes into effect, and we will continue to dig our own economic grave. The only certainty about the tax rebates is that they will increase our debt and continue to haunt us in the future.