Stimulation-palooza moves forward: Pelosi, Boehner reach agreement
Democratic and Republican congressional leaders reached a tentative deal Thursday on tax rebates of $300 to $1,200 per family and business tax cuts to jolt the slumping economy.
Congressional officials close to the negotiations said House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio reached agreement in principle in a telephone call Thursday morning.
The officials, speaking on condition of anonymity, said the two wanted key members of their parties to sign off on the accord before any announcement.
The movement came as the White House said agreement seemed imminent. “Our understanding is there is no final deal yet but they are making progress,” presidential spokeswoman Dana Perino said early Thursday.
Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining rebates of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.
Families with children would receive an additional $300 per child, subject to an overall cap of perhaps $1,200, according to a senior House aide who outlined the deal on condition of anonymity in advance of formal adoption of the whole package. Rebates would go to people earning below a certain income cap, likely individuals earning $75,000 or less and couples with incomes of $150,000 or less.
Another element of the plan is a package of tax breaks for businesses that could cost as much as $70 billion, far more than had been expected, a senior House aide and a Democratic lobbyist said.
Borrow and spend to borrow and spend. How’s that deficit?:
The deficit for the current budget year will jump to about $250 billion under Congressional Budget Office figures released Wednesday, as a weaker economy and lower corporate profits weigh on the government’s fiscal ledger.
And that figure does not reflect more than $100 billion in red ink from an economic stimulus measure in the works……House Budget Committee Chairman John Spratt Jr., D-S.C., said the 2008 deficit might reach $379 billion once the costs of an upcoming economic stimulus measure under negotiation between the Bush administration and Congress are factored in.
Don’t you love farce?
***
Much-needed wisdom from economist Don Boudreaux:
The calls are loud to put more money into the hands of ordinary Americans in hopes that they will spend – not save – it, thereby boosting the overall economy.
Such stimulus, however, is futile. Government cannot create genuine spending power; the most it can do is to transfer it from Smith to Jones. If the Treasury sends a stimulus check to Jones, the money comes from taxes, from borrowing, or is newly created.
If it comes from taxes, the value of Jones’s stimulus check is offset by the greater taxes paid by Smith, who will then have fewer dollars to spend or invest. If Uncle Sam borrows to pay for the stimulus checks, this borrowing takes money out of the private sector. Any dollars borrowed – whether from foreigners or fellow Americans – for purposes of stimulus would have been spent or invested in other ways were they not loaned to the government.
The only other means of paying for such stimulus is for the Federal Reserve to create new money. Unfortunately, this option leads inevitably to inflation.
All Americans wind up with more dollars in their wallets but also paying higher prices in the stores. Prosperity is not created by raining down upon the populace more monochrome pictures of dead statesmen…
…”It’s only when the tide goes out that you learn who’s been swimming naked.” That saying, credited to Warren Buffett, points to the important – if painful – role that recessions play: moving money from bad investments to sound ones. Delaying this adjustment with the hallucinogen of easy money does no one any favors over the long-run.
Spending power is not so much the fuel for economic growth as it is its reward. And the key to economic growth is investment that raises worker productivity.
The best way for policymakers to foster such growth is to avoid panicking over any current economic downswing. Instead, they should focus on getting the economic fundamentals right. Such emphasis might not make things better – or even make things appear to be better – today, but it will make our tomorrows as bright as possible.
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This is an outright joke. As expected, those that don’t pay income tax will receive a rebate.
Of course, those above their maximum thresholds, get nothing.
Pathetic.
I’ve said it before this is going to cost us more than any refund that we will recieve. I heard it out of a liberal’s mouth yesterday on Chrissy Mathew’s show, “This is a redistribution of Funds” liberal speak for redistribution of wealth.
Bait: Refund’s, Money that belong’s to tax payer’s.
Switch: Redistribution of Funds, Free money for those who don’t pay taxes.
Vote buying with tax dollars again…If they were to announce that there was going to be a proportionate amount of spending cuts to pay for the rebates, it may be worthwhile. Also, why the $150k ceiling? People making over that amount are paying most of the taxes in this country. Why are they getting the shaft? Politicians make me sick.
Election year politics at it’s worst. They are giving away our hard earned tax dollars to buy votes, after all they have the lowest approval rating of any congress ever.
Yesterday the CBO came out and they projected a slow down of the economy and an increase in the deficit, but not a recession. Now, obviously, all economic forecasts are suspect no matter how credible the source and the CBO is fairly credible. Predicting the economy is dicier than the weather though.
That said, the CBO’s prediction is in line with what I have been predicting and frankly in line with what the economic numbers are. Our unemployment is still 5%, GDP is still growing at 3.6%, the stock market is still near all time highs (even after the massive recent declines), dollar at all time lows, and oil at all time highs.
In this economic climate we have very aggressive monetary policy and now we have more aggressive fiscal policy. This very likely means that all of this stimulus will stimulate a period of inflation. That is my fear and here is how I analyzed it.
Great, more BS from our theives in Washington. Last time they did this I got a tax refund of $1.98. Just let me have the money I have earned and watch what the economy does.
How about if they cut taxes, regulation, and overall interference with everyday Americans trying to scratch out the proverbial “happy tune without breaking his neck”?
Bi-partisan Political Thoughts:
Hey, let’s take out a loan with foreign treasury investors and sprinkle the principle over the poor and middle class in a show of economic concern.
We won’t have to pay it back anytime soon. What’s another $150 billion anyway? Just think of all the imported goods this will buy.
Responsible Fiscal Thoughts:
This is NOT a tax cut. This is NOT a refund. This is NOT a redistribution of wealth.
This is simple borrowing and spending of the loan amount.
Classic Keynesianism. And for that reason it should upset anyone who calls themselves a fiscal conservative.
You know what would really stimulate me? A massive injection of economic conservatism.
Stop taxing work, savings and investment, and you will get much more of it.
Another idea is that all combat pay for active duty and Reserve/National Guard should be %100 tax free. It’s the least we could do.
CLEAR!!!
The people who braved the Atlantic Ocean to come to the New World were people who wanted the government to leave them alone to live out their lives on their own terms.
The people who packed up covered wagons and moved west were, also, people who just wanted the government to stay out of their lives.
The people who built up our industry were people who wanted the government to just simply set down some basic rules to live by, then get out of their way so they could develop their ideas.
They would turn over in their graves to see that now we expect the government to manage eveything.
Wait.. I thought the government knew how to spend our money better than we do…
I will point out something. Everyone is screaming for fiscal conservatism but with all due respect if we are in a time of a recession, that is the time to run budget deficits. My problem here is that I believe this is an overreaction, however most of the other arguements I read are void of economic reality, with all due respect.
If the bleeping government did what we have to do and spend less than it earns, there would likely be some spare change (as if $150B were change) to stimulate a sluggish economy.
Oh, wait, what if the government kept it’s place and let the economy work itself out? Well, now, that would just be mean. (Although it would be the best thing to do in the long term, short term, any term…..) / sarc off
If they can afford to give all that money back, maybe they didn’t need it in the first place. CUT MY TAXES!!!
It’s gotta be love in advance of Valentine’s Day.
Economist Don Boudreaux said:
Yes, but any good politician knows that low-income Jones will spend it on cigarettes and lottery tickets and thereby give most of the money back to the government as taxes and sucker-bet state-sponsored gambling instead of saving it like high-income Smith.
You can keep my “refund”.
Oh wait, I’m not getting one.
ACHefty (#7), I couldn’t agree more. But that isn’t good enough for the “I want it now” attitude of the majority of the American people.
Someone has to stand tough on economic policy, even if their approval ratings tank.
Heck, if we’re going to have a paternalistic government, the least they could do is be a decent parent.
Stop trying to spoil us and start doing what is good for us, even if we’re too stupid to like or understand it. As we mature, we’ll get around to understanding what you were trying to teach us.
Someday we might collectively say:
Simply ridiculous. I am sadly disappointed in President Bush. Talk about caving in. This will do absolutely nothing to stimulate anything but malt liquor and Camel sales. Once again, the people who actually buy products get left out. How do you call it a “rebate” when you do not pay taxes in the first place??
Let’s see another redistribution of wealth scheme. Let’s see, I made over 75,000 dollars last year, so I am too rich, and I just have to share in the 150 billion dollar increase in National Debt this creates.
BTW: I am still trying to figure out how Republicans are different than Democrats.
Yes, and they’re also getting hit by the AMT. Why are they getting the shaft? Because they already have “TAX CUTS FOR THE RICH” and they don’t deserve anything more!!!!
Well, since I am also rich…made more than $75,000 last year, I should have money to invest. Since this package will elevate the stock of Philip Morris and Anheuser Busch, I am going to buy a bunch of call options on those stocks.
Is this “rebate” or “stimulus” plan “FOR THE CHIIIIIILDREN”, too?
Once again, I hope level heads are reading the fine print on the wording of this “stimulous package”; how many times have democrats signed onto something they didn’t want only for Republicans to see – after it was too late – that there was some provision about amnesty, future tax increases or some other bit of socialism hidden in the mix?
Never mind the hidden stuff. The bill overall STINKS, as usual.
The cutoff @ $75K makes this a redistribution – our $300 in taxes to cover the deficit to somebody who doesn’t pay taxes.
Have ranted about that, it is smart to buy calls on booze and toys.
Yup, another dumb move. I’ve given up on Bush. I expect this kind of crap from the dems. Once again, redistribution. I wonder what else is in this plan? Will people on welfare, ssi get their money to buy a fancy 60 inch LCD HDTV ?
We are going to get the guilded purple shaft with barbed wire clusters in our household tool. Our combined income exceeds $75,000 so no rebate for us. Nothing like punishing the producers to give our money to people who pay little or no taxes. Makes me as happy as seeing someone get more back in a tax rebate then they pay in to the system.
Thanks for fighting for economic conservatism, Republicans!! The GOP is in such a great state precisely because of that.
Can I get government subsidised coverage for the head wound I’m about to self-inflict by banging my head against a wall?
If they want to give me back some of my money I’m fine with that. That means fewer bridges to nowhere. And if it raises the deficit, big deal. The deficit is the only brake that has any effect on Washington spending.
Why aren’t the Dems waving mufflers and saying it’ll do nothing for the poor?
Give my rebate to Walter Reed Hospital.
“Panic” is a key word here. To act with such haste implies immediate action is necessary, not just discretionary. An underlying assumption is that the economy is in worse shape than is being reported.
Well I’d certainly like to have some money back for the over $13,000 I paid in taxes last year, but I won’t.
Steal from me to pay for thee.