Thursday, August 07, 2008

Another GWB/Congressional Failure: The Rebate


Martin Feldstein, originally a backer (!!) of 'the rebate,' is forced to recant.

Those of us who supported this fiscal package reasoned that the program would boost consumer confidence as well as available cash. We hoped the combination would cause households to spend a substantial fraction of the rebate dollars, leading to more production and employment. An optimistic and influential study by economists at the Brookings Institution projected that each dollar of revenue loss would increase real GDP by more than a dollar if households spent at least 50 cents of every rebate dollar.

The evidence is now in and that optimism was unwarranted. Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity.

Meanwhile, George is in China, where he was told to buzz off by PRC officials.

He's burning a helluvalotta fuel to get there and back; but doesn't really give a rip about whether normal Americans have fuel to burn in, say, 5-10 years or so.

Just ask the Republicans still fighting for offshore-drilling.

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