Something central I see as a point of argument over the stimulus is whether we should concentrate on job creation or if we should try to limit job loss. Obviously the correct answer should be both, but since the partisan line seems to be towards one or the other, let's look at which would help the economy now and which would be a better long term decision.
If you give 50 people $500, you have effectively pumped $25,000 into the economy. Multiplier effects aside, the Bush Rebate has empirically been shown that that money does in fact stimulate the economy within two fiscal quarters of its input. Three quarters and beyond, the stimulus drastically disappeared; it was spent or saved. Similarly, a spending spree typically is seen in the GDP between March and May; people are spending their rebates after they file their income taxes.
So the argument for tax credits and tax rebates goes that by providing these benefits to people who are in the position to spend money will benefit the economy by stopping job loss; if I buy a couch, that might keep one more person employed at Nebraska Furniture Mart. Or if 50 people buy couches with their rebate checks, then we might pay a year's salary for an employee there. And that money is spent immediately.
Conversely, by concentrating not on tax breaks but instead on programs to provide new jobs, one makes a much more responsible decision in the long-term, but does not provide instantaneous impact on the economy. By taxing the people with existing jobs, it logically would seem that they are not able to make any positive effect to the economy beyond what they are doing right now. In fact, by increasing their tax burden, their spending decreases (however slightly). So in simple math terms, you tax 50 people $500, and you create a new job. That person, who was previously unemployed, is now able to spend the income and boost the economy.
However, if you give a tax rebate to 50 people, it seems to me that they get to do what they want with 100% of that $500 rebate (as rebates aren't taxed). But when you create a government job through taxation and program creation, that person will only get to spend whatever percentage of their income isn't used for taxes, health care, paying down debt...etc.
So to me, in simple logical terms, a tax rebate for everyone would benefit the economy (by preventing job loss through economic stimulation) more than taxation and job creation.
In any case, this is all getting way beyond my limited expertise in fiscal policy. Better to let experts duke it out, and I'll stick to what I love best: bioengineering.
A Starry Night in the Valley of the Roses
5 hours ago