Bartlett Is Half Right About Those Refund Checks

In the NY Times, economist Bruce Bartlett opposes the refund stimulus plan:

WITH unusual speed and cooperation last month, George W. Bush and Democrats in Congress agreed to a tax rebate set to be paid out beginning in May. Families will get checks for $300 to $1200 or more, and it is assumed that they will all rush out to spend this money immediately, giving retailers a boost that will raise economic growth.

Despite the bipartisan support for the rebate, few economists have supported the idea. They note that we have tried rebates in the past — most recently in 2001 — and there is no evidence that they have meaningfully stimulated either consumption or growth. By and large, people saved the money they received or paid bills (which is the same thing); very few used their rebates to increase spending.

I agree: most won’t spend, unless they have to (and any whose income is that bad needs long-term financial help–$600 isn’t going to cut it). While I disagree with Bartlett’s suggestion to help Fannie Mae buy up some of the bad loans, he is right that it won’t do much in the way of stimulus. What would help is if the $300-$1200 per household were split between the muncipality and the state in which that household resides.

Most local and state governments are suffering from budget shortfalls due to property tax revenue decreases and lower sales tax revenues. Most also have outstanding deferred maintenance problems. If given the money, they will spend it–all of it.

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7 Responses to Bartlett Is Half Right About Those Refund Checks

  1. _Arthur says:

    If one country could borrow its way to prosperity, everyone would be doing it !
    Or just plain print lots of money.

  2. Mark P says:

    I almost certainly won’t spend any “refund” on anything I wouldn’t have bought without it. But I certainly don’t want my local or state government to get it, because I don’t trust them to spend it wisely. Or even legally.

  3. Michael Schmidt says:

    You look like someone whose knee has been hit with a rubber hammer, Mark. Take a look around you at the roads, the school buildings, the bridges, the parks–all that was bought with local and state government money. I can’t guarantee that it was all spent 100% wisely or legally, but a huge chunk of it must have been, or those roads, buildings and bridges wouldn’t be there. I’ll bet the private sector wastes or steals 10 times as much on any given day.

  4. Mark P says:

    Michael, take a look around me yourself. Do you have any idea where I live or what local governments have done with tax money here? And what the private sector does is irrelevant. That’s their money. Tax money is my money.

  5. sex shop says:

    You look like someone whose knee has been hit with a rubber hammer, Mark. Take a look around you at the roads, the school buildings, the bridges, the parks–all that was bought with local and state government money. I can’t guarantee that it was all spent 100% wisely or legally, but a huge chunk of it must have been, or those roads, buildings and bridges wouldn’t be there. I’ll bet the private sector wastes or steals 10 times as much on any given day

  6. rx1 says:

    I almost certainly won’t spend any “refund” on anything I wouldn’t have bought without it.

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