Psychologist Abraham Maslow had a saying, "When all you have is a hammer, everything is a nail."
For American economists and politicians, all they have are two things-- prime rate cuts and tax cuts-- so it seems. And oh yes, a horrendous, record setting economic disaster that many are already saying has set off recession, not to mention losses of of millions of homes by default and losses of tens of billions of dollars.
So how will a tax break plan help? How will rate cuts help?
The way the Dems, GOP and Bush are talking, using a general tax break, makes no sense.
A lot of people will buy imported crap or pay off credit cards.
One polls shows that 58% will use it to pay off debt, 25% will save it and 17% will spend it.
This is stupid and it won't work.
Then we have our one button Ph.D. Bernanke. Poor guy. He has a job where all he can do is push the button to raise or lower the prime rate. Fact is, with all the other economic factors influencing the economy, this has a smaller and smaller real effect. Sure, it generates a one day blip up in the DOW. But it also decreases foreign incentive to invest and probably contributes to the decrease in the value of the dollar. Import prices (read that computers, Walmart stuff, clothing, shoes, toys) go up.
There's no doubt that Bernanke will lower the rates soon, and probably a few more times. It's like crack cocaine to the investment world-- a quick fix, big high, but short lasting. It is an act of desperation by a man attributed with a lot of power who really doesn't have that much power. I was going to say it's not his fault, but as the "czar" of the economy, it is his job to come up with tools for affecting and influencing the economy-- to provide options and solutions. Sticking with the same failed tool-- the one Greenspan used to take us into this economic disaster (only to sign up with someone who profited enormously from it)-- is to ride the same failure train down into further disaster.
It's understandable and reasonable that the leaders of congress and Dubya want to do something-- to come up with an economic stimulus plan-- or something to slow or stop the descent into further economic trouble, or should I say disaster?
But it is irresponsible to just throw out tax rebates-- flagrantly, stupidly, brazenly pandering to the easy fix. It is shameful. Of course, Bush, the worst president in history, is too dumb to come up with anything intelligent, and too bad a leader to have any advisors who will give him reasonable counsel-- or too bad a leader to listen to any who provide reasonable counsel. He just wants to give out money to consumers, "so they will spend it."
That leaves the congress to prevent Bush from throwing away hundreds of billions more dollars. Fat chance that they will do anyting. It will take some guts to say "no" to Bush. So far, the Dem congress has not shown any ability (slight inclination yes) to actually refuse to give Bush what he asks.
CNN reports that in 2001, when $400-$600 was given in tax rebates, two thirds of the money "entered the economy" within a few months. What kind of languaging game is that?
Entered the economy? SOunds like the description of a stallion impregnating a mare-- entering her. Well, money entering the economy is meaningless. It must help people and businesses financially, and help the economy. There is sex, sex for procreation and love-making. Money entering the economy is like mindless, loveless, sloppy, mindless sex, and nothing more. And the question is, who is being screwed, or screwed over?
There are a few million people who will lose their homes and probably their life savings in the next year. This bandaid will not help them.
There are banks and lending institutions that have lost tens of billions of dollars. This will not help them.
There are construction workers, electricians, plumbers, drywall hangers, carpenters, painters-- who will all lose work and jobs as the housing market worsens. This will not help them.