That Makes Me Stabby: The Second Economic Stimulus Proposal

Welcome to my new occasional series: That Makes Me Stabby. It will focus on stupid economic news that really makes me angry. A lot of things have made me stabby this week. Most of them centered around AIG’s endless shenanigans, the election in general, and the dire prognostications of various financial experts. The thing that ticked me off the most, though, was the new economic stimulus proposal being floated. Once again, I think they’re totally missing the mark.

The Proposed Economic Stimulus Package
So far, we don’t know much about the proposal because it’s still being argued, but the Los Angeles Times summarized the key point: “members of both parties in Congress believe the government must find a way to put more money into the hands of average Americans, especially with consumer spending accounting for more than two-thirds of gross domestic product. ”

Barack Obama floated a package that centered around infrastructure, unemployment extensions, energy-assistance, and tax breaks for businesses that increase hiring.

The Democrats also want to add on more money for healthcare and mortgage renegotiation.

Republicans would like to do more to shore up banks and offer additional tax breaks to large businesses.

There is also some talk that the package could contain more stimulus checks to encourage spending. Because the first one worked out so well? I feel stabbiness coming on.

What’s Wrong with the Proposal
I’m not opposed to a new stimulus package in general. The stimulus checks, bank infusions, mortgage renegotiations, and tax breaks for big business are the parts that make me stabby.

Rebate Checks: We paid for the prior checks through more borrowing, so I will have to repay those checks through higher taxes someday. And they didn’t even work. Most people used them to pay off debt or saved the money. So what makes anyone think people would spend them this time? We can’t keep relying on consumer spending to dig us out of this hole!!

Bank Infusions: We already infused capital into several banks. Will yet another one change anything? I don’t think so. The first one hasn’t even taken effect yet.

Mortgage Renegotiations: Congress keeps talking about propping up home values and helping people stay in their homes. That’s a slap in the face to those of us who were responsible and waited until we could reasonably afford a home, or recognized that homes were over-valued and decided to wait until prices were more appropriate. Although home values may have over-corrected in some areas, they’re still way overvalued in others (like California.) Once home values reach historic levels, then the market will stabilize. Artificially propping up values simply shifts the suffering to later. It doesn’t make it go away permanently.

Tax Breaks: If Congress starts handing out more tax breaks, who exactly is going to pay for all this stimulus? We can’t keep leveraging the future to pay for current mistakes. Eventually, someone is going to have to pay for this. That’s a nice FU to the future children of the world, isn’t it?

What the Package Should Contain
I liked the original plan floated by the Democrats. It focused spending on infrastructure improvements. This is an excellent idea and doesn’t make me in the least bit stabby. I support infrastructure projects for three reasons:

Job Creation: Infrastructure projects create real jobs with decent salaries. These projects usually last years, which means they will keep people employed for years. Rather than giving people a few hundred bucks to spend, let them earn many thousands of dollars so they can support their families, pay their bills, and buy stuff.

Increased Tax Base: Again, it goes back to job creation. When people are working, they pay income taxes. The more people there are working, the more money the federal government receives. Then maybe we could afford to pay off all this debt we’ve accumulated through the other attempts at fixing things.

Improved Infrastructure: Duh! The U.S. needs to make major infrastructure investments anyway. Our roads, bridges, levees, and railroads desperately need improvement. Rather than wait until these projects are emergencies that cost us far more to fix, let’s put the projects into the system now when we have time to do it right for a reasonable price.

So there you go. I feel better now. How do you feel about the new stimulus proposals? What would you like to see? Also, what makes you stabby right now?

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